LLC
What does "LLC" mean in law?
A limited liability company (LLC) is a hybrid business entity that combines the limited liability protection of a corporation with the operational flexibility and pass-through tax treatment of a partnership. Members of an LLC are generally shielded from personal liability for the entity's debts and obligations, and the internal governance is primarily determined by the operating agreement, which functions like a partnership agreement in its flexibility. LLCs can be managed by their members directly (member-managed) or by appointed managers (manager-managed), and unlike corporations, they are not required to observe formalities such as annual meetings or board resolutions. Fiduciary duties in LLCs vary by jurisdiction; some states allow the operating agreement to modify or even eliminate default fiduciary duties, while others treat them as non-waivable.
Definition
A limited liability company (LLC) is a hybrid business entity that combines the limited liability protection of a corporation with the operational flexibility and pass-through tax treatment of a partnership. Members of an LLC are generally shielded from personal liability for the entity's debts and obligations, and the internal governance is primarily determined by the operating agreement, which functions like a partnership agreement in its flexibility. LLCs can be managed by their members directly (member-managed) or by appointed managers (manager-managed), and unlike corporations, they are not required to observe formalities such as annual meetings or board resolutions. Fiduciary duties in LLCs vary by jurisdiction; some states allow the operating agreement to modify or even eliminate default fiduciary duties, while others treat them as non-waivable.
Example
Three software developers formed an LLC with an operating agreement specifying member-managed governance, equal profit sharing, and a provision requiring unanimous consent for any expenditure over $50,000, giving them partnership-like flexibility with corporate-like liability protection.