What is a Limited Liability Company?
A limited liability company (referred to as an “LLC”), like a corporation, is a legal entity existing separate and apart from its owners. The owners of an LLC are called “members.” An LLC is created when proper articles of organization (or the equivalent under the laws of a particular state) are filed with the proper state authority (usually the Secretary of State), and all filing fees are paid. Some state laws may impose additional pre or post-creation requirements as well.
The three main advantages of the LLC structure are:
• The LLC, Like a partnership, is given a pass through tax treatment, i.e. profits and losses are reported on each owner/member's individual tax return;
• The LLC, like a corporation, provides limited liability to its owners/members, which means that creditors can collect only from the LLC’s assets, and not directly from the owners/members of the LLC.
• The LLC provides flexibility in management and other issues while preserving the 2 advantages listed above