WHAT IS A LIMITED LIABILITY
COMPANY (LLC)?
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An LLC is a hybrid entity, governed by state
law. Its stockholder or members can
elect to have the entity taxed as either a corporation or a partnership. Members usually elect treatment as a
partnership. Unlike a partnership,
members of an LLC have limited liability, as if they were stockholders in a
corporation. Unlike the stockholders of
a C Corporation, the members are not subject to double taxation.
LLC’s are managed either by its
members, or by managers. That is
determined when the LLC is first formed, and is set forth in the Operating Agreement;
a document roughly equivalent to corporate bylaws and partnership agreements.
An LLC’s managing member, or any
member who participates in operation of the LLC’s business for more than 500
hours a year, is subject to self-employment tax on compensation received from
the LLC.