What is an LLC? A plain-English definition.
An LLC, or Limited Liability Company, is a US business legal structure that creates a separation between the owner and the business. If the business is sued or owes money, the LLC takes the hit; the owner's personal assets, home, car, savings, are generally protected. It is the most common structure for new US businesses.
A Limited Liability Company (LLC) is a legal business structure authorized by US state statute that combines the liability protection of a corporation with the tax flexibility and operational simplicity of a partnership or sole proprietorship.
Here is what that actually means.
In plain English: when you form an LLC, you are creating a new "person" in the eyes of the law. That new person (your LLC) can own property, sign contracts, owe money, get sued, and have bank accounts. You are the owner of this new person, but you are not the same as it. That separation is the whole point.
If the LLC is sued, only the LLC's assets are at risk. If the LLC owes money it cannot pay, only the LLC's assets get distributed to creditors. Your personal home, car, savings, and other LLC interests stay separate. This is called the "liability shield" or "corporate veil," and maintaining it requires some basic discipline (separate bank account, no commingling, proper documentation).
For tax purposes, the IRS treats a single-member LLC as a "disregarded entity" by default, meaning profits flow to the owner's personal Schedule C. A multi-member LLC files Form 1065 as a partnership. Either can elect S-Corp tax treatment to reduce self-employment tax above ~$60,000 in profit.
The four things to know.
Common situations.
Related concepts side by side.
Common questions.
How much does it cost to form an LLC?
How long does it take?
Do I need a lawyer to form an LLC?
Can a non-US citizen own a US LLC?
What is the difference between an LLC and an LLC name?
Do I need an Operating Agreement?
Does an LLC pay federal income tax?
Can I form an LLC and an S-Corp?
Which state should I form my LLC in?
Related guides.
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