What is an LLC as a business structure?

An LLC, or Limited Liability Company, is defined as a hybrid business structure that combines characteristics of both a corporation and a partnership. This structure provides its owners, commonly referred to as members, with the limited liability protection typical of a corporation, meaning that members typically are not personally responsible for the debts and liabilities of the company. This protects their personal assets in case the business faces legal issues or bankruptcy.

Along with limited liability, an LLC allows for flexible tax treatment. By default, an LLC is taxed as a pass-through entity, meaning the profits and losses can be reported on the personal tax returns of the members, avoiding the double taxation often associated with traditional corporations. Additionally, LLCs can opt to be taxed as a corporation if that is more beneficial for their financial situation.

This combination of liability protection and flexible taxation makes the LLC an attractive option for many small business owners and entrepreneurs, balancing the benefits of both corporations and partnerships effectively.