A limited liability company is a type of business entity that combines the elements of a corporation and sole proprietorship or partnership. It is a legal form of a company that provides limited liability to its owners in the great majority of jurisdictions in the United States. Owners of limited liability companies are also known as “members”. Since some states do not restrict ownership, members may include individuals, corporations, other limited liability companies and foreign entities. There is no maximum number of members. Most states also allow limited liability companies with only one member.
The main feature a limited liability company shares with a corporation is limited liability and the main feature shared with a partnership is pass-through income taxation and management flexibility. A limited liability company is often more flexible than a corporation and is ideal for companies with a single owner. It is important to point out that limited liability does not mean that owners are fully protected from personal liabilities. The personal liabilities of the company´s members is limited to business debts and actions. However, courts sometimes pierce the corporate veil of corporations or limited liability companies when fraud or misrepresentation is involved.
In the United States, a limited liability company is known as an LLC. Limited liability companies in the United States are relatively new, created to assist small business with acquiring the same benefits corporations have. However, unlike corporations, limited liability companies do not have shareholders and do not require meetings. They also do not require bylaws, even though there are some states that require an operating agreement for the company to carry out its business activities.