limited liability company, or "LLC", is
an unincorporated business entity which can be called
a cross between a corporation and a partnership. Like
a corporation, an LLC protects its members from personal
liability for the debts and obligations of the company.
Like a partnership, an LLC is typically formed by filing
a "certificate of formation" or similar certificate
with the Secretary of State and is taxed like a partnership.
Also like a partnership, the members of LLCs typically
enter into an operating agreement which establishes
how the LLC is managed. This agreement controls
the management of the company and how the members relate
to each other.
S Corporations have limits on the number of
shareholders who also must be US residents, LLCs have
no restrictions in these regards. This makes the
LLC a particularly suitable vehicle for non-US residents.
An LLC can have more flexibility in management because
this is controlled by the members agreement not by the
Business Corporation Act (BCA) of the state.
the LLC elects to be taxed as a corporation, it will
be taxed as a partnership - income and deductions of
the LLC will be passed through to members for inclusion
in their personal income tax returns. See How
will my Company be Taxed? for more information.
If one or more of the owners are US non-residents or
if you have a non-traditional management structure and
so need more flexibility than the standard Officers
and Directors arrangement of corporations governed by
the state's Business Corporation Act provides, then
an LLC may be for you. If tax considerations are
a driving factor, you can achieve the same pass-through
taxation by electing S Corporation status as a corporation.