Limited Liability Company
A Limited Liability Company (LLC) is the 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 in and of itself, but is a legal form of a company that provides limited liability to its owners in many jurisdictions. Limited Liability Companies are well 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.
An Limited Liability Company 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. It is often more flexible than a corporation, and it is well-suited for companies with a single owner.
Although LLCs and corporations both possess some similar features, the basic terminology commonly associated with each type of legal entity, at least within the United States, is sometimes different. When an Limited Liabilty Company is formed, it is said to be “organized,” not “incorporated” or “chartered,” and its founding document is likewise known as its “articles of organization,” instead of its “articles of incorporation” or its “corporate charter.” Internal operations of an LLC are further governed by its “operating agreement,” rather than its “bylaws.” The owner of beneficial rights in an LLC is known as a “member,” rather than a “shareholder.” Additionally, ownership in an LLC is represented by a “membership interest” or an “LLC interest” (sometimes measured in “membership units” or just “units” and at other times simply stated only as percentages), rather than represented by “shares of stock” or just “shares” (with ownership measured by the number of shares held by each shareholder). Similarly, when issued in physical rather than electronic form, a document evidencing ownership rights in an Limited Liabilty Company is called a “membership certificate” rather than a “stock certificate.”