LLC
A limited liability company (LLC) is a United States-specific form of a private limited company. It is a business structure that can combine the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation. An LLC is not a corporation under the laws of every state; it is a legal form of a company that provides limited liability to its owners in many jurisdictions. LLCs are known for the flexibility that they provide to business owners. Depending on the situation, an LLC may elect to use corporate tax rules instead of being treated as a partnership, and under certain circumstances, LLCs may be organized as not-for-profit. In certain U.S. states (for example, Texas), businesses that provide professional services requiring a state professional license, such as legal or medical services, may not be allowed to form an LLC but may be required to form a similar entity called a professional limited liability company (PLLC).
An LLC is a hybrid legal entity with characteristics of both a corporation and a partnership or sole proprietorship (depending on how many owners there are). An LLC is a type of unincorporated association, distinct from a corporation. The primary characteristic an LLC shares with a corporation is limited liability, and the primary characteristic it shares with a partnership is the availability of pass-through income taxation. As a business entity, an LLC is often more flexible than a corporation and may be well-suited for companies with a single owner.
Although LLCs and corporations possess analogous features, the basic terminology used within the United States is different. When an LLC is formed, it is organized rather than incorporated, and its founding document is known as the articles of organization instead of the articles of incorporation. Internal operations of an LLC are governed by its operating agreement. An owner of an LLC is called a member rather than a shareholder. Additionally, ownership is represented by a membership interest (measured in units or percentages) rather than shares of stock. Similarly, a physical document evidencing ownership rights is called a membership certificate rather than a stock certificate.
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