What Does LLC Mean?

An LLC is a type of corporation, and the inclusion of the letters "LLC" in a company's name tells the public that this company is operating as a separate legal entity. Those who own the LLC cannot be held personally liable for actions or omissions by the company. Here are a few more facts about LLCs.

Identification

LLC stand for Limited Liability Corporation, which is a particular type of incorporated business. There is more than one way to incorporate a business, and an LLC is a particularly attractive form of incorporation, especially for people who are running small businesses. An LLC enjoys the same legal protection that other types of corporations have, but an LLC can provide more favorable tax benefits.

Significance

The letters "LLC" indicate that a business is its own legal entity. For this reason, LLCs are required to include the letters "LLC" in the company's name, as part of the company's name on checks, legal documents and in most other paperwork, such as invoices. The letters "LLC" indicate that the company must meet certain legal standards as defined by the Secretary of State's office.

Features

LLCs tend to be smaller businesses. In many states, one person can be the sole owner of an LLC, which makes this form of incorporation attractive to the small business owner. State law requires LLCs to file annual reports with the Secretary of State's office in the state in which the LLC incorporated. LLCs must comply with all state regulations in their operation.

Benefits

Owners of businesses that incorporate as an LLC enjoy the same legal protection as owners of any other type of corporation. The owners of the LLC cannot be held personally liable for actions taken by the company. Also, an LLC's profits are only taxed once (at the individual level) instead of twice (individual and corporate level) as with a C-corporation. Most states will allow non-United States citizens to own shares in an LLC.

Effects

Owners of an LLC must follow specific requirements for relinquishing their interest of the business. These requirements are more restrictive than those for other types of corporations. For example, before a member can sell an ownership interest in an LLC, the person might need to obtain written consent from all other members of the LLC in order to sell. There might also be limitations on who may purchase the seller's membership interest.

Resources

• Read this Article in Spanish
• Direct Incorporation