What is a Limited Liability Company?

Limited Liability Company Features


The limited liability company has become the preferred form of business organization for the vast majority of newly formed businesses.  It offers the limited liability of a traditional corporation, combined with the flexibility of a partnership.

A limited liability company, or LLC, requires less formality and is taxed as a partnership, meaning that all of the profits and losses of the business pass directly through to the owners without being taxed at the level of the business.  This is a substantial economic benefit to the owners.

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While pass-through taxation is also available to the shareholders of a corporation that is taxed as a Subchapter S Corporation (an S-Corp), there are limits for S-Corps that are not applicable under most LLC statutes.  The most important of these limits is the requirement that the shareholders of an S Corporation be humans (as opposed to a business ) and that there can only be a single class of stock.

An LLC, meanwhile, will permit businesses to hold an interest as a member, and will also give the business the benefit of pass-through taxation.  The ability to have more than one class of owners, such as a class established for employees, can be a key component of a limited liability company.

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