A Limited Liability Company (LLC) is designed to protect its owner from being sued personally for any type of business liability. An LLC is filed and granted at the state level. LLC owners, which can be one or more individuals, are called "members."

Federal Taxes

The federal government does not have a tax classification for LLCs, which must file as a corporation, partnership or sole proprietor. IRS Form 8832 must be filed by an LLC so that the IRS has the company's entity classification on record.

Single Member LLC

A Single Member LLC is taxed the same way a sole proprietor is, just as an LLC that files as a corporation is taxed as a corporation.

EIN

Filing for an EIN number with the IRS (form SS-4) is optional in some states, depending on whether or not the LLC has employees, while other states make it a requirement.

Forming an LLC

An LLC is created by filing organization forms with the state entity that handles business filings, which is usually the office of Secretary of State. Some state LLC forms are very basic while others can be very detailed. Filing fees vary from state to state in the range of $100 to $8,l00.

Management

An LLC can be managed by members or an outsider. Sometimes only one member of the ownership group handles management while other silent investors share profits without participating in management.

Limited Liability Limits

Protection against personal liability is not completely guaranteed for an LLC. If an owner breaks laws, commits fraud, uses the business as an extension of personal finance, directly injures someone or does not handle employee taxes correctly, that owner can be held personally liable for those actions.

Source:

IRS.gov

LLC Basics

Resource:

LLC.com