Definition (canonical)
An LLC (Limited Liability Company) is a US business form combining a corporation's liability shield with pass-through taxation and near-total contractual freedom in structuring ownership. Members are not personally liable for company debts, while profits flow to their personal returns without an entity-level tax — the combination that made LLCs America's default small-business vehicle.
How it works
Formation is state-level (Delaware, Wyoming and the home state dominate for different reasons): file articles, appoint a registered agent, adopt an operating agreement — the internal constitution that LLC law leaves almost entirely to the parties: profit splits detached from ownership percentages, custom management (member-managed vs manager-managed), transfer restrictions. Tax classification is elective: default pass-through (disregarded entity for one member, partnership for several), with an option to be taxed as a corporation — one legal form, several tax personalities.
LLC vs corporation — the founder's fork
Corporations (C-corps) issue standardized stock, which is why venture capital insists on Delaware C-corps — option pools, preferred shares and stacked rounds map poorly onto LLC membership interests. LLCs win for cash-flowing businesses, holding assets, real estate and closely-held ventures where pass-through taxation and flexibility beat fundraising standardization. Rule of thumb: building for VC → C-corp from day one; building for profits and dividends → LLC. Conversions are possible but cost time and tax analysis — choosing right early is cheaper.
Non-US founders and the honest caveats
Non-residents CAN own LLCs, which fuels an industry of "US company in a day" offers. The honest caveats: an LLC does not by itself grant US bank access (banks apply their own KYC), does not remove home-country taxation (residence and permanent-establishment rules still apply — a Polish resident running a US LLC from Poland is typically taxable in Poland), and single-member LLCs of foreigners carry specific IRS filing duties (pro-forma 1120 + 5472) with painful penalties for ignorance. The vehicle is legitimate and useful for US-market invoicing and platform access; treating it as a tax vanishing act ends badly.
FAQ
Does an LLC protect me from everything? From company debts — yes, if formalities are respected; not from personal wrongdoing, personal guarantees, or "piercing" when finances are commingled.
What does it cost? State filing fees plus annual franchise taxes/reports — from tens of dollars (Wyoming) to hundreds (Delaware, California adds its own levy), plus registered agent.
LLC vs Ltd vs sp. z o.o.? Cousins, not twins: all shield owners; taxation and internal flexibility differ by country — see the Polish sp. z o.o. comparison on our PL side.
Related: Startup · Equity · Venture Capital Reviewed: 2026-07-15 · Sources: state LLC acts; IRS rules