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Comparison:
A limited liability company, or "LLC",
is an unincorporated business entity which is
a cross between a corporation and a partnership.
Like a corporation, an LLC protects its members
from personal liability for the debts and obligations
of the company. Like a partnership, an LLC is
typically formed by the filing of a "certificate
of formation" or similar certificate with
the Secretary of State and is taxed like a partnership.
Also like a partnership, the members of LLCs
typically enter into an operating agreement
which establishes how the LLC is managed. This
agreement controls the management of the company
and how the members relate to each other.
Where S Corporations have limits on the number
of shareholders who also must be US residents,
LLCs have no restrictions in these regards.
This makes the LLC a particularly suitable vehicle
for non-US residents (See Company Formation
for US Non-residents.) An LLC can have more
flexibility in management because this is controlled
by the members agreement not by the Business
Corporation Act of the state.
Unless the LLC elects to be taxed as a corporation,
it will be taxed as a partnership - income and
deductions of the LLC will be passed through
to members for inclusion in their personal returns.
Bottom Line:
If one or more of the owners are non-US citizens,
if you have a non-traditional management structure
and so need more flexibility than the standard
Officers and Directors arrangement of corporations
governed by the state's Business Corporation
Act, then an LLC may be for you. If tax considerations
are a driving factor, you can achieve the same
pass-through taxation by electing S Corporation
status as a corporation.
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