Limited Liability Co.
The limited liability company (or LLC) is a hybrid type of business structure. It contains elements of both a traditional partnership and a corporation. Only in the last few years has it become available as a form of business in all 50 states and Washington D.C. Its uniqueness is that it offers the limited personal liability of a corporation and the tax benefits of a partnership. A limited liability company consists of one or more members/owners who actively manage the business of the limited liability company. There may also be nonmember managers employed to handle the business.
The members/owners in such a business enjoy a limited liability, similar to that of a shareholder in a corporation. In general, the members’ risk is limited to the amount of their investment in the limited liability company. Since none of the members will have personal liability and may not necessarily be required to personally perform any tasks of management, it is easier to attract investors to the limited liability company form of business than to a traditional partnership. The members will share in the potential profits and in the tax deductions of the limited liability company, but will share in fewer of the financial risks involved. Since the limited liability company is generally taxed as a partnership, the profits and losses of the company pass directly to each member and are taxed only at the individual level.
A further advantage of this type of business structure is that it offers a relatively flexible management structure. The company can be managed either by members/owners themselves or by managers who may or may not be members.
A final advantage is that limited liability companies are allowed more flexibility than corporations in how profits and losses are actually allocated to the members/owners. Thus, one member/owner may be allocated 50 percent of the profits (or losses) even though that member/owner only contributed 10 percent of the capital to start the company.
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