Written by — Co-Founder, Expert Sapiens
Reviewed June 2026
Legal & IP
What Is LLC (Limited Liability Company)?
Definition
An LLC (Limited Liability Company) is a business structure that provides its owners (called members) with personal liability protection — meaning your personal assets are generally protected from business debts and lawsuits — while offering flexible taxation options.
An LLC combines the liability protection of a corporation with the tax flexibility of a partnership. Members are not personally liable for the company's debts or legal judgments beyond their investment in the company. By default, a single-member LLC is taxed as a sole proprietorship (income passes through to the owner's personal return), and a multi-member LLC is taxed as a partnership. Members can also elect to be taxed as an S-Corp or C-Corp. LLCs are formed by filing Articles of Organization with the state and paying a formation fee — typically $50–$500. Most states also require an annual report and a registered agent. An Operating Agreement (not required in all states but strongly recommended) governs member rights, profit distribution, and management structure.
Why it matters
Choosing the right business entity is one of the most consequential early decisions a founder makes — affecting your tax liability, personal risk exposure, and ability to bring on investors. A business attorney or formation specialist can ensure your LLC is structured correctly from day one, including the operating agreement and any state-specific requirements.