A Limited Liability Company (LLC) is formed when one or more business people join to do business together. LLC is a hybrid business entity having certain characteristics of both a corporation and a partnership. The owners of an LLC, called members, file Articles of Organization and set out an Operating Agreement.
Unlike a corporation, an LLC is a pass-through type of business. Pass-through businesses are those in which the profits and losses of the business pass through to the owners. In other words, the business income is considered as the owner’s income, and the owner pays the tax on his or her personal tax return. Whereas, Corporations are separate businesses entities and the profits and losses of the corporation are taxable to the corporation, not the owners. However, both corporations and LLCs limit the liability of the owners/shareholders from the debts of the business and against lawsuits against the business. The liability of the members of an LLC is limited to his or her capital investment. Corporations are required to keep formal minutes, have meetings, and record resolutions. The LLC business structure requires no corporate minutes or resolutions and is easier to operate.