Limited Liability Company (LLC) &: Limited Company (LC)

“LLC” stands for “limited liability company,” and “LC” stands for “limited company.”  They are basically the same thing, but different states call them different names.  We will refer to both entities as an “LLC” in this article.  LLC’s can be member-owned (which means the owners are passive members and hire separate, salaried management) or member-managed (which means the members manage the business, as well as own it).

An LLC is essentially a hybrid corporation and partnership.  Almost every state has adopted some version of an LLC, and it provides all the benefits of a partnership with the limited liability, taxation benefits and stock transferability of an S corporation.  Nonresident aliens can be shareholders, and members can manage their business without risking personal liability.  Thus, to summarize, an LLC has all the benefits of an LLP and an S Corporation, with the protection from liability that a C corporation has.  As you can imagine, this is a very popular business type.  Finally, in many states, sole-owner LLC’s are allowed.  This means that, unlike a partnership, which requires at least two people, one person can often go into business all by himself/herself and still have an LLC (this is not the law in all states, however).

There are three drawbacks to an LLC.  First, LLC members have to observe some business formalities.  They do not have to observe as many formalities as a C corporation, but they still should have meetings, keep minutes, etc.  Second, LLC shares are not publicly traded.  That means that, like an S corporation and an LLP, your business can grow quite strong, but it will never amass the capital of Google or Microsoft until it is publicly traded, which only C corporations can do.  Finally, the biggest drawback of an LLC is that the law covering LLC’s from state to state can be quite different.  Thus, an LLC may be an excellent choice for a business that is located primarily in one state, but businesses that are looking to operate in several states often choose an LLP, because the laws are more or less the same in each state.  This makes important business decisions easier for business owners who have operations in many states.

An LLC is one of the best business options for resident and nonresident aliens deciding to create a business in the United States. Aliens who want limited liability and the right to manage their businesses cannot find that mutual ability in an LP or an LLP.  For alien who are going to start off with a small business, a C corporation may not be necessary at first.  Nonresident aliens are not allowed to own an S corporation precisely because they are nonresident aliens.  But an LLC provides all aliens (resident and nonresident) with limited liability, protecting their personal assets, and allows active management of their businesses.  So a lot of our clients decide to make an LLC.  We wish them all great luck, and hope their new businesses take off and become quite successful!

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