A limited liability company, or LLC, is a business entity created under state law that combines characteristics of both a corporation and a partnership. Like a corporation, the owners of an LLC are generally not personally liable for company debts. Like a sole proprietorship or a partnership, an LLC has operating flexibility and is, by default, a "pass through" entity for tax purposes. This means that the LLC does not pay taxes on its profits, but instead, profits and losses are "passed through" to the owners, who must then pay tax on their share of LLC income.

To form an LLC, owners must file with their appropriate state agency and pay a filing fee

• Members (owners) are not personally responsible for business debts and obligations (liability protection)
• Flexibility in management control and profit sharing
• High degree of flexibility and simplicity in the ongoing management of the business
• No extra tax filing requirement as profits or losses can be reported on the owner's tax return (pass through taxation) unless the LLC chooses to be taxed as a corporation (double taxation)
• No ownership restrictions (e.g. US citizens or # of owners) which is similar to an S corporation

• More expensive to form than sole proprietorships or partnerships and in certain situations may be more at the outset than a corporation
• Certain types of outside investors may be less comfortable dealing with an LLC than a corporation