1/9/2020 What is a Limited Liability Company (LLC)?

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What is a Limited Liability Company (LLC)?

Home » Accounting Dictionary » What is a Limited Liability Company (LLC)?

Definition: A limited liability company (LLC) is a business organization that has some
benefits of a corporation and some of a limited partnership. In other words, an LLC is
an entity type that gives owners the benefits of owning a corporation while maintaining
the advantages of a limited partnership.

What Does LLC Mean?

This is a relatively new form of business compared to corporations. For a while many High-quality clips, now on rotation
states did not recognize LLCs as legitimate business entities. Today most states have
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special rules for limited liability companies that allow owners a few different benefits.

Example
For example, LLC owners, usually called members, are protected with limited liability just like if they were shareholders in a
corporation. Third parties cannot attack owners’ personal assets because of this protection. Also, members can participate directly
in the management of the company. This means each member can vote on issues and will have a say in how the day-to-day
operations are carried out.

Unlike corporations, on the other hand, LLCs do not pay taxes directly. In this way, it is treated more as a partnership than a
corporation. The members themselves are responsible for the income taxes of the company because the revenue flows through the
company to the individual investors based on their ownership share.

As you can see, the company structure is really the best of both worlds. It has all the major benefits of a corporation without the
technical and tedious downsides. At the same time, it avoids the double taxation that C corporations have when trying to distribute
profits to their owners. LLCs avoid this by allowing the profits to flow directly to the owners without having to pay a separate
dividend tax.
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