LLC

In corporate law, LLC is a term that refers to a private limited company. The structure of an LLC is a combination of a corporation and a sole proprietorship, thus taking on some of the characteristics of both and combining them into one entity. In the United States, partnerships and sole proprietorships are subject to pass-through taxation, where taxation is done to the income that the owners get, rather than the income of the company as a whole. This feature is passed on to an LLC.

Corporations in the United States are usually treated as legal entities, which means that any income they generate is taxed in the name of the company rather than the owners. This can turn out to be more expensive compared to pass-through taxation. The feature that an LLC borrows from a corporation is obviously not the tax regime, but the limited liability.

Setting up an LLC requires several conditions to be met in order for it to be successful. One of these is ensuring that the business type is allowed to be run in the form of an LLC. In some states, businesses that offers services which require professional licenses such as medical services cannot be organized as LLCs, but can be formed as PLLCs or professional limited liability companies. This is not an absolute rule in all the states.

Some of the advantages of an LLC include the fact that running it requires much less paperwork and recordkeeping compared to a corporation, so management staff can be kept to a minimum. In some states, such companies can also be formed by just one person.