What is a Limited Liability Company (LLC)?
Like a corporation, a limited liability company, or an LLC, is a separate and distinct legal entity. This means that an LLC can obtain a tax identification number, open a bank account and do business, all under its own name. The primary advantage of an LLC is that its owners, known as members, are not personally liable for the debts and liabilities of the LLC. For example, if an LLC is forced into bankruptcy, the members will not be required to make up the difference with their own money. If the assets of the LLC are not enough to cover the debts and liabilities, the creditors cannot look to the members, managers or officers for recovery.An LLC can be taxed either as a "pass-through" entity, like a sole proprietorship or partnership, or as a regular corporation. By default, an LLC is taxed as a pass-through entity, and the owners of the LLC are not subject to double taxation. This is different from a regular corporation, which pays a corporate tax on its net income (the first tax). Then, when the corporation distributes profits, the stockholders pay income tax on dividends (the second tax). With an LLC, the profits "pass through" to the owners who pay taxes at their individual tax rates.
An LLC is a blend of a partnership and a corporation, giving you the best of both organizational worlds.