What is an LLC?
An LLC is a limited liability company, one of the four general ways you can choose to organize your business (the other three being as a sole proprietorship, as a partnership or as a corporation). LLCs are a newer type of business entity, as most states did not have laws recognizing the LLC form until the 1980’s. Over the last few decades, however, LLCs have become very popular due to the fact that they combine some of the most attractive features of both partnerships and corporations. Specifically, LLCs afford their owners the same type of limited liability associated with corporations, meaning that LLC owners are not generally personally liable for the business’ debts and losses. However, compared to corporations, LLCs are relatively easy to set up and the LLC form provides more flexibility than the corporate form - in this regard, LLCs are more akin to partnerships.
It should be noted that many state laws do not allow certain organized professionals to run their business as an LLC (or, for that matter, as a corporation). For example, in many states lawyers or doctors can not join together in an LLC because the state has decided that these professionals should not be entitled to the strict limited liability afforded to LLC owners. In such states, these professionals will often form a limited liability partnership instead, as this is the most protection they can obtain when not permitted to form an LLC or a corporation.