What is a limited liability company or LLC?

A limited liability company, or LLC, is a legal entity similar to a corporation that allows businesses and investors to limit their liability exposure in a particular business to the amount of their investment thereby protection the owners personal assets. The limited liability company is similar in many respects to a corporation. However, a limited liability company is more flexible in terms of the ownership structure, management structure, and flexibility for taxation. LLC's are often used by businesses, investors, or individuals who wish to engage in a particular enterprise and desire to limit their exposure to any potential liability. A LLC protects its members from personal liability from the debts, claims, and creditors of the LLC. The liabilities of the LLC may only be satisfied out of the assets of the LLC. For example, imagine an LLC that was organized to own and operate a restaurant. Let's say the LLC had assets (real estate, accounts receivables, and cash) in the amount of $250,000. Let's further assume that the two members (owners) of the LLC had personal assets (homes, retirement accounts, cash) exceeding $500,000. Now let's assume that a liability such as a personal injury claim arose against the restaurant and that the plaintiff obtained a judgment in the amount of $400,000. The plaintiff could only satisfy the judgment out of the $25,000 assets of the LLC; he could not satisfy the balance of his judgment out of the members' personal assets. This feature of the LLC--the limited liability feature--allows business owners or individuals to separate their business assets from their personal assets and limit their liability to their capital investment