Business Entities

LLC

An LLC, or limited liability company, is a legal business structure that can be taxed in different ways depending on elections and ownership.

Quick answer

An LLC, or limited liability company, is a legal business structure that can be taxed in different ways depending on elections and ownership.

It matters because owners often confuse the legal structure with the tax treatment, and the two are not always the same.

A one-owner LLC may still be taxed like a sole proprietorship unless it makes another election.

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Plain-English Definition

What LLC means

An LLC, or limited liability company, is a legal business structure that can be taxed in different ways depending on elections and ownership.

Why it matters It matters because owners often confuse the legal structure with the tax treatment, and the two are not always the same.
Simple example A one-owner LLC may still be taxed like a sole proprietorship unless it makes another election.
Related Questions

Questions people ask about LLC

What does LLC mean?

An LLC, or limited liability company, is a legal business structure that can be taxed in different ways depending on elections and ownership.

Why does LLC matter?

It matters because owners often confuse the legal structure with the tax treatment, and the two are not always the same.

What is a simple example of LLC?

A one-owner LLC may still be taxed like a sole proprietorship unless it makes another election.

When should I ask a CPA about LLC?

Ask a CPA when the term affects how your business is taxed, how owners are paid, or whether an election could reduce tax.

How is LLC different from S-corp?

LLC means An LLC, or limited liability company, is a legal business structure that can be taxed in different ways depending on elections and ownership. S-corp means An S-corp is a tax election that allows qualifying businesses to pass income through to owners while splitting owner pay between salary and distributions when the facts support it. The difference is that they apply to different tax, accounting, or business situations and should not be treated as interchangeable.

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