Limited Liability Companies: Frequently Asked Questions

What is a Limited Liability Company?
The LLC is a distinct business entity. An LLC offers an alternative to partnerships and corporations by combining the corporate advantages of limited liability with the partnership advantage of pass-through taxation.
Limited Liability Companies are a relatively new business form in the United States, though they have a long-standing history in Europe. LLCs were first formed in the United States in 1977, and were granted pass-thru tax status by the Internal Revenue Service in 1988.
As a result, LLC can elect to be taxed like partnerships, only at the individual level when profits are paid as dividends. This yields a considerable advantage over C corporations, which are subject to double-taxation – once at the corporate level, and again at the individual level when profits are paid as dividends to the shareholders.
Similar to corporations, LLC shield personal assets from business debt. Note, however, that LLC have a limited life that varies from state to state and do not have stock (and thus do not get the benefit of stock ownership and sales). Currently all 50 states recognize the LLC business form.