what is a limited liability company llc 
a limited liability company llc is a business structure in the u s that protects the assets of its owners from lawsuits and creditors concerned with the company s business debts limited liability companies are hybrid entities that combine the characteristics of a corporation with those of a partnership or sole proprietorship while the limited liability feature is similar to that of a corporation the availability of pass through taxation to the members of an llc is a feature of a partnership rather than an llc understanding a limited liability company llc limited liability companies are permitted under state statutes and the regulations governing them vary from state to state generally llc owners are called members many states don t restrict ownership which means that anyone can be a member that includes individuals corporations foreigners foreign entities and even other llcs some entities such as banks and insurance companies are prohibited from forming llcs 1an llc is a formal business arrangement that requires articles of organization to be filed with the state an llc is easier to set up than a corporation and provides more flexibility and protection for its investors llcs may elect not to pay federal taxes directly instead their profits and losses can be reported on the personal tax returns of the owners or the llc may choose to be classified as a corporation for tax purposes 2if fraud is detected or if an llc fails to meet its legal and reporting requirements creditors may be able to go after the members 3llcs should not be confused with an unlimited liability corporation ulc which is a corporate structure allowed in certain countries and in some canadian provinces the wages paid to llc members are deemed operating expenses and are deducted from the company s revenue forming an llc1 although the requirements for llcs vary by state there are generally some commonalities the very first thing owners or members must do is to choose a name 2 then articles of organization can be completed and filed with the state to establish the llc this document can provide basic information about the llc the names and addresses of the llc members the name of the llc s registered agent and the statement of purpose for the business the articles of organization are filed with the state in which the llc is formed along with a fee paid directly to the state paperwork and additional fees must also be submitted at the federal level to obtain an employer identification number ein 43 an llc operating agreement will lay out the operational and financial decision making roles and duties of members it will state just how profits are to be distributed it is the contract between all members of the llc and provides all details about the llc s structure and important business functions normally this internal document remains with the llc and isn t distributed externally a registered agent is a company that an llc hires to manage the various legal and government correspondence sent to the llc so that it can be sure to comply with state regulations benefits of an llcdrawbacks of an llcan llc may not be a suitable option if the founder s ultimate objective is to launch a publicly traded company llc vs partnershipthe primary difference between a partnership and an llc is that an llc separates the business assets of the company from the personal assets of the owners insulating the owners from the llc s debts and liabilities both llcs and partnerships are allowed to pass through their profits along with the responsibility for paying the taxes on them to their owners 2 their losses can be used to offset other income but only up to the amount invested by a member if the llc has organized as a partnership it must file form 1065 if members have elected to be treated as a corporation form 1120 is filed 5with an llc a business continuation agreement can be used to ensure the smooth transfer of interests when one of the owners leaves or dies without such an agreement in place the remaining partners must dissolve the llc and create a new one 