Business Entities - What is a LLC?

The Limited Liability Corporation is governed by Subchapter K of the Internal Revenue Code.  It is a hybrid business entity that provides its owners with the limited liability of a corporation and the tax benefits of a partnership.  For tax purposes, a LLC is a "flow through" entity in that all profits, losses, gains and deductions "flow through" to the individual owners'/members' individual tax return. If the LLC is properly formed and operated according to the state law then the members are not personally liable for the debts and obligations of the business.  This particular entity must have at least two members but some states allow single member formation.

An operating agreement is usually adopted by the members detailing company operations, distributions, transfer of interest, and liquidations.  All members may elect to participate in the management of the business or may agree to hire a manager to conduct the affairs of the business while the members maintain indirect control of the organization.

To set up a LLC, the members/owners must file with the state.  The filing should include the business name, the registered agent along with the names of those managing the organization.  To learn more about forming a LLC click here - File your incorporation or LLC right – from the small business experts at Intuit, maker of Quickbooks and TurboTax