Limited Liability Company (LLC) is a non-incorporated business organization that retains elements of both partnerships and corporations. The LLC form allows a lot of flexibility in arranging the organizations to the specific needs of its investors. An LLC can be composed of members that each own and control equal parts of the business, or an LLC can be managed by some members with different control and profit allocations among all the members. Also, an LLC can receive pass-through taxation like partnerships or may choose corporate taxation should it be preferred. While retaining this flexibility, the investors in an LLC have limited personal liability in the business.
LLCs must go through registration with the related state entity and create the certificates of organization. The actual structure and management of the LLC typically is contained in the operating agreement. Investors generally have much smaller guidelines and procedures to follow in an LLC compared to a corporation. However, courts may pierce the corporate veil where the LLC operates more or less as an extension of an investor, not a separate entity with its own finances and documentation. Courts vary greatly by state on when the corporate veil for an LLC will be pierced, but courts most commonly do so in situations where the LLC appears an opportunistic way to defraud creditors, especially where there is only one investor. Compare with limited liability partnership (LLP).
[Last updated in March of 2022 by the Wex Definitions Team]