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What is an LLC?

Limited liability companies (“LLCs”) are a creation of state law. An LLC is somewhat of a hybrid entity in that it can be structured to resemble a corporation for owner liability purposes and a partnership for federal income tax purposes. An LLC offers the limited liability the benefit of a corporation and the single level of taxation of a partnership. The owners, not the entity, are then responsible for the payment of the tax, if any.

LLCs are owned by investors known as members. The company is typically managed by a designated member or group of members. Like shareholders of a corporation, the members' liability is limited to the amount of their investment. For tax purposes, LLCs with more than one owner are treated as partnerships, and LLCs with one ownerare disregarded. In both cases, the LLC income is taxed to the owner directly without any entity level tax.