Overview of Limited Liability Companies (LLC)

Limited Liability Companies (LLCs) are one of the most popular entity choices for investors and entrepreneurs. LLCs offer a tremendous amount of flexibility and, in certain key states, a great deal of asset protection.

The flexibility allows for unique management and taxation benefits. LLCs can be managed by their members (or owners) or by outside managers. As well, LLCs can choose how to be taxed – either as a disregarded single member entity (where the tax reporting flows directly onto the sole owner’s personal return) or as a multiple member partnership. LLCs can be taxed as an S corporation or C corporation. No other entity has this flexibility.

A key feature of the LLC in many states is the charging order protection. In weak states, like California, New York and Georgia, if an LLC member gets sued the attacker can force a sale of the LLC assets. In strong states like Nevada and Wyoming a charging order is a lien against distributions. The attacker can’t force a sale of the LLC assets, but must wait for distributions, which may or may not come.

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