A limited liability company (denoted by L.L.C. or LLC) in the law of many of the United States is a legal form of business company offering limited liability to its owners. It is similar to a corporation, and is often a more flexible form of ownership, especially suitable for smaller companies with a limited number of owners. Unlike a regular corporation, a limited liability company with one member may be treated as a disregarded entity, so the member is often singled-out as a person performing the actions of the LLC. A limited liability company with multiple members may choose, generally at the time that the new entity applies for a US federal taxpayer ID number, to be treated for U.S. federal taxation purposes as a partnership, as a C Corporation, or as an S corporation. An LLC can elect to be either "member managed" or "manager managed."

Advantages

• No requirement of an annual general meeting for shareholders.
• No loss of power to a board of directors.
• Much less administrative paperwork and recordkeeping.
• Pass-through taxation (i.e., no double taxation), unless the LLC elects to be taxed as a corporation using IRS Form 8832.
• Limited liability, meaning that the owners of the LLC, called "members," are protected from liability for acts and debts of the LLC.
• Using default tax classification, profits are taxed personally at the member level, not at the LLC level.
• Check-the-box taxation. An LLC can elect to be taxed as a sole proprietor, partnership, S-corp or corporation, providing much flexibility.
• LLCs in some states can be set up with just one natural person involved.
• Membership interests of LLCs can be assigned, and the economic benefits of those interests can be separated and assigned, providing the assignee with the economic benefits of distributions of profits/losses (like a partnership), without transferring the title to the membership interest.

Disadvantages

• Many states, including New York, levy a franchise tax or capital values tax on LLCs. In essence, this franchise or business privilege tax is the "fee" the LLC pays the state for the benefit of limited liability.
• It may be more difficult to raise capital for an LLC, as investors may be more comfortable investing funds in the better-understood corporate form with a view toward an eventual IPO.
• Although there is no public requirement for an operating agreement, members who operate without one may run into problems.
• Some people, such as new business people, may not be familiar with the governance of LLCs. Unlike corporations, they are not required to have a board of directors or officers.
• The principals of LLCs use many different titles -- e.g., member, manager, managing member, chief executive officer, president, partner -- some of which are not correct. As such, it can be difficult to determine who actually has the authority to enter into a contract on the LLC's behalf.
• All income members receive is taxed at ordinary income rates and subject to FICA tax.

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