LLC Formation combines core elements from Corporations and Partnerships. The basic structure of LLC formation is:
- The owners have limited liability for the entity’s debts and obligations, similar to a corporation; and
- The income or losses from the business are passed through to the owners, similar to a Partnership.
Distinguishing Elements of LLC Formation
An LLC sets itself apart from a Partnership in the following ways:
- A formal document, often called Articles of Organization, are filed in the state where the LLC is Incorporated; and
- The owners of an LLC are not personally liable for the debts and obligations of the entity.
It is different from a corporation in the following ways:
- The entity is not taxed; instead, profits and losses flow through to the owners;
- It has less administrative requirements than a corporation as it lacks shareholders; and
- It does not have an unlimited life in most jurisdictions and may need to be dissolved upon the death of an owner.