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What is a limited liability company?
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A limited liability company (LLC) is a relatively new business entity in the United States. The first modern LLC statute was adopted in Wyoming in 1977 and by 1997 every state allowed the creation of a limited liability company. Its basic features are

  • its owners have limited liability for the entity's debts and obligations, similar to the status of shareholders in a corporation or limited partners in a limited partnership, and

  • its income and losses are normally passed through to the owners as if it were a partnership (or sole proprietorship, in the case of a single member LLC owned by an individual).

An LLC is probably most like a limited partnership, except that a limited partnership, unlike an LLC, is required to have at least one general partner which is liable for the debts and obligations of the partnership. In an LLC, there is no need for anyone to undertake personal liability for the entity.

There is no separate federal tax classification for an LLC. For federal tax purposes, an LLC is treated as a sole proprietorship, a partnership, a corporation or an S corporation. Federal tax treatment depends upon a number of factors, including the number of members and whether certain tax elections were made.

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