Limited Liability Company (LLC) at a Glance

A flexible hybrid...

- A combination between a partnership and a corporation, LLCs provide protection for personal assets and ownership flexibility without the formalities of a corporation.

- Run by multiple owners (members), but they do not share personal liability for the business.

 - Members do not have to be directly involved with the business. They can appoint managers to run the company on their behalf.

ADVANTAGES

• Pooled Resources w/ Limited Liability – Members of an LLC can pool their resources like partners in a partnership, but they are not personally liable for one another. If the LLC is sued, members only risk losing what they have invested.
   
• Flexible Management Structure – Members of a LLC can appoint managers to run the company on their behalf. This means a member does not have to be directly involved with the business the way a partner would. Managers can be actual people or even other businesses.
  • Managers are also protected by limited liability
     
• Less Red Tape – LLCs generally have less paperwork and regulation expenses than a corporation. For example, a LLC must register with their state, but are not required to maintain minutes or have an annual meeting.
   
• Taxation Flexibility - By default, a LLC is taxed like a partnership. The business itself is not taxed, the business income is divided between the owners who report their portion on their personal taxes. LLCs can also choose to be taxed as a corporation if it's to their advantage.

DISADVANTAGES

• Some Complexity and Regulation - While LLCs have less red tape than a corporation, they do have more formal requirements and formation expenses than a partnership or a sole proprietorship. This includes higher startup costs due to registering with their state, as well as annual maintenance costs associated with the state.