LLC is an abbreviation for “limited liability company” (not limited liability “corporation”). A limited liability company is a type of business entity that is popular amongst small business owners for its level of flexibility. It is perhaps the most flexible of any business entity. It’s convenient for both small businesses with a single owner and very large companies with many classes of ownership interest.
LLCs are limited liability entities, which means that they provide a corporate “veil” or “shield” between the actions of the company and its owners. In the event that your company owes a debt or is sued you can’t be held personally responsible for those debts (there are lots of rules that govern and limit this liability, but in general this is how it works).
LLCs combine the best elements of corporations and sole proprietorships by providing a good amount of liability protection (the owners aren’t responsible for the debts and judgments of the company) like a corporation but you are taxed as a “pass through” entity. This means you are taxed on your personal income tax statement for profits earned through an LLC and you’re not double taxed like a c-corporation.
An owner of an LLC is called a member. Members own “membership interest” in an LLC instead of stock. Ownership interest can be expressed as a percentage of the company or in membership interest units, which work like shares.
The operation of an LLC is governed by the laws of the state you are formed in and by the operating agreement. An operating agreement is a detailed agreement you have with the company and with the other owners, and it sets forth the way the company is organized, who owns what, how membership interest may be transferred to new owners, and how to vote.
LLCs can be managed by its members, directors, or by specially appointed managers. If you use PUSHTOSTART, our attorneys will set up your company in a way that is flexible and makes sense for your situation.
How many owners can my LLC have?
As many as you want, as long as you follow your operating agreement’s rules about admitting members.
Does my LLC need officers?
Yes, most states require LLCs to appoint at least two officers, which may be the same person.