Step Two: Limited Liability Company

A Limited Liability Company (LLC) is not a corporation. It is a distinct form of business ownership that combines features of the corporation with features of the partnership or sole proprietorship.

Forming an LLC is similar to forming a corporation. Articles of organization must be prepared and filed and fees must be paid. You may wish to consult an attorney if you choose to form an LLC.

An LLC is like a corporation in that it provides liability protection for its owners. It is like a sole proprietorship, partnership or S Corporation in that it protects its owners from double taxation: profits are accounted for on the individual owner(s)' income tax returns. The LLC owners may choose to operate the LLC like a corporation, and elect managers to run it, or they may choose to operate like a partnership and manage the company themselves. A single person may also operate an LLC.

LLC Pros and Cons

Pros. The major advantages include: 1) the owner(s)' liability is limited; 2) there is no double taxation. Con. It is somewhat complex and expensive to form an LLC.

For additional information on LLCs, visit the NOLO Law Center's web site.

For more information on business structures, click here.

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