We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What is a Limited Liability Company (LLC)?

By Josie Myers
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

A Limited Liability Company (LLC) is a relatively new type of business that was started in 1977 in Wyoming. This business structure uses some of the best advantages of several other types of businesses and combines them into one. Like a C Corporation, the owners have limited personal liability, but have the tax advantages of an S Corporation and the flexibility of a partnership.

Like a standard corporation, only the company's assets are at risk, while individual shareholders are protected. This ensures that an owner will never loose more than the amount of money they have invested in the stock. In the case of legal disputes, creditors can not take personal possessions or savings from individual stockholders. Unlike a corporation, an LLC does not have to have corporate meetings and keep minutes. They generally have less scrutiny than corporations who are traded publicly.

Like an S Corporation, an LLC is not subject to double taxation. The money paid to members is not taxed before distribution as it is with a C Corporation. Despite this similarity, there are two large advantages that a LLC has over an S Corporation. S Corporations require a 100 maximum number of shareholders and these must be individuals. Members in an LLC can be corporations and are unlimited, except that there must be at least two. When any owner leaves, the remaining members must agree to continue the business or it is dissolved.

An LLC allows for flexibility of management and distribution of money that is not found in other business forms. A partnership must divide all profits 50-50. With an LLC, the profits can be handed out based on agreed proportions that represent each individual's stake in the company.

The main disadvantages to an LLC are that it can not live on indefinitely and it can not offer public shares. When one member dies or files for bankruptcy, the company will die unless agreements have been made prior to the event. The way that profits are split arbitrarily does not allow for sale to the general public. If a company plans on offering public shares in the future, an LLC is not the best choice of structure.

In order to form a LLC, there are two basic steps. Articles of Organization must be filed with the Secretary of State along with required fees. An Operating Agreement isn't always required, but is a good idea. This agreement gives an idea of how profit sharing, responsibility and ownership changes will work and offers some level of protection for the members. It is not required to have lawyers draw up these documents, although it is highly advised.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Discussion Comments
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.