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What is an LLC?

By Sherry Holetzky
Updated: May 16, 2024

LLC stands for Limited Liability Company. Because it is not a partnership or a corporation, the owners of an LLC are not partners or shareholders, they are "members." Such companies are frequently labeled Limited Liability Corporations, but corporation is inaccurate and company is the proper term.

An LLC actually combines aspects of partnerships and corporations, so an LLC is less formal and more flexible than a typical corporation, yet offers protection as well as certain advantages that are much the same. For example, members cannot be found personally liable for company debts. Their assets are separate from the assets of the LLC so they cannot be seized. One of the advantages of an LLC is that taxation is based on the partnership model. Flow-through taxation is advantageous since members are only required to pay taxes on their earnings once instead of paying both corporate and individual taxes.

A Limited Liability Company, unlike a corporation, can be made up of as many members as the company wishes to have and it does not require bylaws, meetings, or the recording of minutes. While many states do not demand an operating agreement, it is a good idea to have one in place of the usual bylaws or contracts.

In corporations, shareholders may transfer stock or their interest in ownership, while members of an LLC cannot. Transferring one's interest in the company may be dependent on the approval of other members. In addition, if a member of an LLC passes away, decides to leave, or goes bankrupt, the LLC is usually dissolved, while corporations are not limited by such restrictions.

To set up an LLC, Articles of Organization must be filed according to state specific guidelines, and any and all fees must be paid. Articles of Organization are usually filed with the Secretary of State. You may wish to hire an attorney to prepare and file the paperwork, or you can do it on your own. In fact, there is reasonably priced software available that will prepare the necessary forms according to your state's regulations, which you can then file yourself.

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
By anon125995 — On Nov 11, 2010

To find out who owns an LLC or a Corporation you can usually look on the Secretary of State website (for the specific state of domicile) and do a corporation "search" where you will enter the company name you are interested in. This will usually show you who the registered agent of the company is as well as the shareholders (for corporations) or members (for LLCs). Corporations and LLCs are required to file annual reports and keep their company and owner information up-to-date. --Haley C.

By anon111757 — On Sep 17, 2010

If a company is listed as an LLC, how can a person find out who owns the company?

By anon111307 — On Sep 15, 2010

What responsibilities does the vice president of an LLC have?

By anon75622 — On Apr 07, 2010

Great discussion!

By anon66899 — On Feb 22, 2010

In what way is the liability of the owners for the debts of the business different?

By anon50394 — On Oct 28, 2009

If an LLC makes a donation to a 501c3 charity, can the LLC receive federal enhanced tax credit under 170e? New product donation, not for fair market value?

By anon49647 — On Oct 21, 2009

Is llc the best way to go if you are running solo?

By anon47933 — On Oct 08, 2009

Can an owner of a llc be sued?

By anon46951 — On Sep 30, 2009

can a member of llc (the owner) be sued? As in divorce settlement?

By anon41272 — On Aug 13, 2009

Can the leinholder of property foreclose if its in a LLC?

By anon38440 — On Jul 26, 2009

what is the difference between llc and incorporation?

By anon35034 — On Jul 01, 2009

Could a corporation form an LLC with an individual? and how is it being done.

By minaminoh — On Apr 21, 2009

Is it possible that one member of the LLC, upon its founding, is based in a different country from the original where the LLC itself is founded in?

By anon28343 — On Mar 15, 2009

Can a person be a CEO of an LLC?

By anon19698 — On Oct 17, 2008

Can a 1 person company have an LLC?

By metroman — On Feb 14, 2008

Can a C corp. with 150 stockholders convert to a LLC then sell their real estate as an LLC and recover gains as an LLC.

is there a waiting period? Thanks.

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