Definition and Characteristics

An LLC is a hybrid business structure that combines the limited liability of a corporation with the tax efficiencies and operational flexibility of a partnership.

• Ownership: Owned by members (individuals or entities).
• Control: Managed by members or appointed managers.
• Liability: Members have limited liability.
• Taxation: Can choose to be taxed as a sole proprietorship, partnership, or corporation.

Pros and Cons

Pros:

• Limited liability protection.
• Flexible management structure.
• Choice of taxation method.

Cons:

• More complex and expensive to set up than a sole proprietorship or partnership.
• Varying regulations and fees by state or jurisdiction.

Real-World Examples

Example: Emily and Ryan run a tech startup as an LLC. This structure provides them with liability protection, meaning their personal assets are safe if the business incurs debts or legal issues. They also appreciate the flexibility in management and the option to choose how they are taxed.