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Many businesses new to the game choose to organize as a limited liability company, or LLC — a hybrid of a partnership and corporation that attempts to reap the benefits of both.
The owners in an LLC are called members and each member holds a membership interest — similar to stock or shares — in the company.
These membership interests are sometimes broken down into units.
As with a corporation, an LLC can have classes of membership interests, each with varying rights and preferences. Most important to members of an LLC: They usually are not personally liable for the LLC’s obligations.
Choice and flexibility:
An LLC can operate in any commercial area and is often used as a holding company for differing sub-entities. Unlike other types of companies, a limited liability company can choose how it would like to be taxed: as a partnership, S corporation or C corporation.
Most LLCs choose to be partnerships (if there is more than one member) or S corporations so the LLC’s profits and losses can flow through to the members.
Few LLCs choose to be taxed as a C corporation because C corporations are subject to double taxation — shareholders are taxed on dividends, and the corporation’s profits also are taxed before dividends are distributed.
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