An LLC is a type of business entity that can have one or more owners, referred to as “members.”
One of the most important features of LLCs is “limited liability”.
What that means is all LLC owners are protected from personal liability for business debts and claims.
If the business itself can’t pay a creditor—such as a supplier, a lender, or a landlord—the creditor cannot legally come after an LLC member’s house, car, or other personal possessions.
Because only LLC assets are used to pay off business debts, LLC owners stand to lose only the money that they’ve invested in the LLC.
In addition, an LLC is not considered separate from its owners for tax purposes.
Instead, it is what the IRS calls a “pass-through entity,” like a partnership or sole proprietorship. This means that business income passes through the business to the LLC members, who report their share of profits—or losses—on their individual income tax returns.
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