What does LLC Mean?

A limited liability company (denoted by L.L.C. or LLC in the US, and LTD in the UK) is a legal form of business company in the United States offering limited liability to its owners. In that respect, it is similar to a corporation, and is often a more flexible form of ownership, especially suitable for smaller companies with a limited number of owners. Unlike a regular corporation, however, a limited liability company with one member is treated as a disregarded entity (or sole proprietorship) and a limited liability company with multiple members is typically treated as a partnership for tax purposes, thereby avoiding double taxation. It is often incorrectly called a "limited liability corporation" (instead of company).

Advantages

* No requirement of an annual general meeting for shareholders (in some states, such as Tennessee and Minnesota, this statement is not correct. In other states, including Georgia, there have been courts who have suggested limited liability companies should maintain corporate formalities, including annual meetings, in the same manner as corporations so as to maintain the limited liability protection afforded to shareholders in a corporation).
* No loss of power to a board of directors (although an operating agreement may provide for centralization of management power in a board or similar body).* Corporations are enduring legal business entities, with lives that extend beyond the illness or even death of their owners, thus avoiding problematic business termination or sole proprietor death. Planning for the death of an owner of an LLC is sometimes more difficult, though there are significant planning opportunities to lessen the impact of estate, gift, and income taxation.
* Much less administrative paperwork and recordkeeping.

Disadvantages

* Many states, including Alabama, California, Kentucky, New Jersey, New York, Pennsylvania, Tennessee, and Texas, levy a franchise tax or capital values tax on LLCs. In essence, this franchise or business privilege tax is the "fee" the LLC pays the state for the benefit of limited liability. The franchise tax can be an amount based on revenue, an amount based on profits, or an amount based on the number of owners or the amount of capital employed in the state, or some combination of those factors, or simply a flat fee, as in Delaware. Effective in Texas for 2007 the franchise tax is replaced with the Texas Business Margin Tax. This is paid as; tax payable = revenues minus some expenses with an apportionment factor.