An LLC, or limited liability company, provides liability protections if legal and financial obligations arise. An LLC offers flexibility unlike C-corporations and S-corporations. Benefits of an LLC include pass-through taxation and limited liability. An LLC shares limited liability with a corporation and pass-through taxation with a partnership. LLCs use different terminology than corporations. When formed, an LLC is "organized" not "incorporated". Its founding document is "articles of organization," not "articles of incorporation."
Asset Protection and Liability
An LLC protects personal assets from business debts and lawsuits. An LLC can have one or multiple members. Members’ assets are usually separate from the business, thereby protected. But protection is not guaranteed if owners mix personal and LLC finances. For example, three business structure options are available: a corporation, partnership, or LLC. The LLC combines advantages of each.
Forming an LLC
"Limited liability" means owners aren’t personally responsible for debts and lawsuits. LLCs range from small online shops to large, multi-level companies. If considering a business, learn about LLCs. Single-member LLCs have one owner, multi-member LLCs have multiple owners. Forming an LLC helps protect you against lawsuits.
Is an LLC a Corporation?
An LLC is not technically a corporation. It provides legal and financial protections like a corporation does, but can be simpler to operate. The main LLC advantage is limited liability protection. Owners’ personal assets can be shielded from company debts and legal issues. An LLC protects assets better than partnerships or sole proprietorships do.
What Type of Business is an LLC?
An LLC combines advantages of partnerships and corporations while limiting owners’ liability for company obligations. LLCs offer asset protection and simplicity, making them a favorable option for most small businesses.