Limited Liability Company
Similar to a partnership, a limited liability company (LLC) is taxed only once on its profits. A C corporation is taxed twice. Unlike a partnership, an LLC protects partners by limiting their personal liability for actions of the company. An LLC offers liability protections similar to those of a corporation. In addition, LLCs have fewer restrictions on shareholders and allow the transfer of shares more easily than a corporation. Finally, profits are reported on personal rather than corporate tax returns.
State laws governing LLCs are based on the Uniform Limited Liability Company Act (ULLCA) developed in 1995 and subsequently revised. The latest versions can be accessed online at the University of Pennsylvania Law School at
LLC Structure
LLCs must be privately held companies. While restructuring a C corporation into an LLC can be difficult and costly, changing your business form from an LLC to a C corporation is quite easy. One major drawback to LLCs is that their limitation of liability has not been extensively tested in the court system, as has that of corporations. If you decide to establish an LLC, make sure you have an attorney who has experience with this structure and who can advise you based on liability and tax issues in your state.
Setting up an LLC
About forty states recognize limited liability companies as a legal business structure. They have been popular in other countries for many years. In establishing an LLC, you will need to file articles of organization and an operating agreement with state authorities.
