Limited Liability Companies


The limited liability company (LLC) is a distinct business entity that combines the corporate advantage of limited liability protection with "pass-through" taxation, the method of taxation afforded to both general partnerships and S corporations.

Like corporations, LLCs come into existence after making a filing with the appropriate state body, typically the Secretary of State, and paying the necessary state filing fees. The LLC formation documents are typically called articles of organization or a certificate of organization.

In terms of taxation, the LLC’s income is not taxed at the entity level as is that of a C corporation. While the LLC does complete a tax return, the income or loss of the LLC as shown on this return is passed through the LLC and is reported on the owners’ individual tax returns. The LLC’s owners then pay taxes on the LLC’s profits at the individual tax level. LLCs can elect with the Internal Revenue Service (IRS) to be taxed like a C corporation, but this is not overly common.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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