Limited Liability Company FAQ
Answers to common questions about starting and running an LLC.
» What is a limited liability company?
How many people do I need to form an LLC?
Who should form an LLC?
How do I form an LLC?
Do I need a lawyer to form an LLC?
Does my LLC need an operating agreement?
How are LLCs taxed?
What are the differences between a limited liability company and a partnership?
Can I convert my existing business to an LLC?
Do I need to know about securities laws to set up an LLC?
What is a limited liability company?
A limited liability company, commonly called an "LLC," is a business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.
Like owners of partnerships or sole proprietorships, LLC owners report business profits or losses on their personal income tax returns; the LLC itself is not a separate taxable entity. Like owners of a corporation, however, all LLC owners are protected from personal liability for business debts and claims -- a feature known as "limited liability." This means that if the business owes money or faces a lawsuit for some other reason, only the assets of the business itself are at risk. Creditors usually can't reach the personal assets of the LLC owners, such as a house or car. (Both LLC owners and corporate shareholders can lose this protection by acting illegally, unethically, or irresponsibly.)
For these reasons, many people say the LLC combines the best features of the partnership and corporate business structures. To learn more about limited liability companies and limited liability, see LLC Basics.
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