20 Jan What is a limited liability company (LLC)?
A limited liability company, or LLC, is a business entity created under state laws which has the characteristics of both a corporation and a partnership. Like a corporation, the owners of an LLC are not personally liable for business debts. Like a sole proprietorship or partnership, an LLC has operating flexibility and is a pass-through entity for tax purposes. This means the LLC’s profits are passed through and taxable to the owners of the LLC.
To create an LLC, Articles of Organization must be filed with the Secretary of State or appropriate state agency. Next, the LLC members should enter into an operating agreement, which sets forth the rights of the members and the rules for running the company. An LLC may also need to apply for a tax identification number with the IRS. LegalZoom can prepare all of the required documents for you.
Recent changes to the IRS code have promoted changes in state laws permitting LLCs to be created with an unlimited life.