LLCs | Advantages and Disadvantages

An LLC (limited liability company) provides the limited liability of a corporation, but the ability to be taxed as a partnership (or a sole proprietorship, if there is just one owner).

You can create an LLC in any of the fifty U.S. states by filing articles of organization (different from articles of incorporation) with the state. With some states this is fairly easy, and simply involves filing a one-page form and paying a filing fee to the secretary of state. Some states, however, subject LLCs to an annual tax.

The owners of an LLC are called members. A single-member LLC will be taxed as a sole proprietorship, while a multi-member LLC will be taxed as a partnership. An LLC can also choose to be taxed as an S corporation or a C corporation.

LLCs have only been around since the late 1970's, so there isn't a lot of judicial case law on how LLCs are taxed. Moreover, state laws regarding LLCs vary considerably. Leaving aside those disadvantages, an LLC is the cheapest, fastest way to obtain limited liability for a business's owners.
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