Limited Liability Company. A Limited Liability Company (an “LLC”) is the newest of the business ownership structures. It offers the owners the advantages of both corporations and limited liability companies. Like the corporation, the owners have limited liability. Unlike the corporation the owners of a limited liability company can choose to be taxed like a partnership without having to meet the guidelines needed to form a Subchapter S corporation. So, if the owners elect, the profits of the LLC may be passed through to the owners and taxed on their individual tax returns. The latter point would be an advantage of course if corporate tax rates are greater than an individual’s personal tax rate.
One of the reasons many attorneys and clients tend to favor the LLC over the corporation is its flexibility and simplicity. Owners may have one voting interest and a different profit sharing interest, for example. In most states there is no requirement of annual meetings as in a corporation. An LLC may have corporate or LLC owners and still elect the “pass-through” tax advantages of a partnership. These are examples of the liberal provisions available to LLC ownership.
CAVEAT: Each State has its own laws governing the different forms of business structures and ownership. While most States aim towards uniformity with the majority of other States, you will always need to check the particular laws of the State in which you plan to form your business.