A Limited Liability Company (LLC) is a relatively new business structure in the US allowed by state statutes since 1970s. Owners of an LLC are called members, which in most states may include individuals, corporations, other LLCs and foreign entities. Many states including Minnesota also permit “single member” LLCs with only one owner.
Similar to a corporation, owners of LLC have limited personal liability to for the debts and actions of the company. But a LLC functions more like a partnership and so is more flexible in management and free from some paperwork requirements. One significant advantage of LLC is that it allows for pass-through taxation, that is, the profits will be allocated to members and be taxed on their individual income level only. This avoids the double taxation of typical business profits that are subject to both (federal and state) corporate income tax and individual income tax (once the profits are allocated).
LLC has its disadvantages too. Many states levy a franchise tax or capital values tax on LLCs as a "fee" for them to benefit from the privilege of limited liability. It may be more difficult for an LLC to raise financial capital as investors may be more comfortable investing funds in the better-understood corporate form. In addition, a few types of businesses, such as banks and insurance companies, generally cannot be LLCs, and there may be addition restrictions in some states.
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