Limited liability company
The equivalent of a private limited corporation in the United States is known as a limited liability company (LLC). A pass-through entity is a kind of company form that may combine the tax benefits of a sole proprietorship or partnership with the restricted liability that comes with a corporation. Under the laws of the state, a limited liability company (also known as an LLC) is not the same thing as a corporation; rather, it is a kind of firm that, in many jurisdictions, offers its owners limited responsibility. LLCs are well-known for the freedom that they allow to company owners. Depending on the circumstances, an LLC may decide to employ corporate tax laws rather than being classified as a partnership, and LLCs may be incorporated as not-for-profit entities under certain conditions. Businesses that offer services that require a state professional licence, such as legal or medical services, may not be permitted to form a limited liability company (LLC) in certain states in the United States, such as Texas. Instead, these businesses may be required to form a professional limited liability company (PLLC), which is an entity that is very similar to an LLC (PLLC).
A limited liability company, or LLC, is a kind of hybrid legal structure that combines elements that are typical of corporations, partnerships, and sole proprietorships (depending on how many owners there are). A limited liability company (LLC) is a unique kind of unincorporated organisation from a corporation. The availability of pass-through income taxation is the major quality that an LLC shares with partnerships, and limited liability is the key quality that an LLC shares with corporations. Both of these qualities are fundamental characteristics of an LLC. An LLC, as a kind of business entity, is often more flexible than a corporation, and it may be an excellent choice for businesses that are owned by a single person.
Although limited liability companies (LLCs) and corporations have certain similarities, the fundamental nomenclature that is widely associated with the two distinct types of legal entities is not always the same, at least in the United States. When a limited liability company (LLC) is created, it is said to be "organised," as opposed to "incorporated" or "chartered," and the document that establishes the LLC is likewise referred to as the "articles of organisation," rather than the "articles of incorporation" or the "corporate charter." A "member" rather than a "shareholder" governs the internal operations of a limited liability company (LLC), which is further controlled by the "operating agreement" of the LLC. In addition, ownership of an LLC is not represented by "shares of stock" or just "shares," but rather by a "membership interest" or a "LLC interest," which is sometimes measured in "membership units" or just "units," and other times is simply specified solely as a percentage (with ownership measured by the number of shares held by each shareholder). In a similar vein, a "membership certificate" rather than a "stock certificate" is the term used for a document that evidences ownership rights in an LLC when it is issued in physical form as opposed to electronic form.
In the lack of explicit legislative direction, the majority of courts in the United States have determined that members of LLCs are subject to the same common law alter ego piercing doctrines as stockholders of corporations. However, since limited liability companies (LLCs) are not required to keep up with a large number of formalities, it is more difficult to penetrate their privacy. It is very difficult to see through the LLC's shield of anonymity as long as the company and its members maintain strict financial separation. Through the use of the charging order mechanism, membership interests in LLCs and partnership interests are also granted a high amount of protection. The charging order restricts the creditor of a debtor-partner or a debtor-member to receiving just the debtor's share of distributions and does not bestow any voting or management rights on the creditor.
When payments to members of a limited liability company (LLC) cause the LLC to go bankrupt, the members of the LLC might, under certain conditions, be held personally liable for the debts of the LLC.