I see more and more businesses with LLC in the name. What exactly does that mean??

Question

I know it means Limited Liability" but who's liability and what's the limit?

Answer 1

Most LLC's are high risk companies that can be sued. Like gun shops, auto-rental, chemical companies, etc. etc. It limits their exposure even more than a plain "inc." if they play the "game" correctly.

Answer 2

Its just a newer form of a corporation. Its similiar to the other corporation types in most ways but the key difference is that all profits and losses are reported right on the owners tax returns - so its easier to run than a standard corporation.

For these companies if they do something wrong and get sued, their liability is limited in that only the assets held by the company can be taken (assuming the corporation is set up correctly). So if I buy a rental property using an LLC and start retning it out. If the tenant then falls down the stairs and hurts themselves they can sue me. If they win (maybe the carpet was damaged and thats why they fell - or something) they can force me to sell my rental house (or take it over) and any other assets owned by that LLC (if there are any) but they can't touch my other rental properties (held by other LLC's) or any assets I personally own (like the house I'm living in or anything else). So this refers to the LLC's liability, and really the liability is limited to the assets owned by the LLC.

Answer 3

Limited Liability varies state by state. The sole purpose behind an LLC is to shield the owners from lawsuits. If an individual or company is harmed by an LLC, that individual or company would be limited (in most cases) to filing suit against the LLC only. That means the owner and his personal assets would be protected from the lawsuit.

LLC's are not specifically for high risk companies. They are selected more often now because they offer the limited liability of a corporation with the flexibility and beneficial tax treatment of a partnership.

Answer 4

LIMITED LIABILITY. Like corporations, the LLC provides its members (owners) with protection from being personally responsible for the debt liabilities of the company. Members are only liable to the extent of their investments in the company. If a customer slips and is injured on company property, a law suit may still bankrupt the business, but it cannot touch the personal assets of the LLC's members. This limited liability, then, is a great advantage over partnerships. In general partnerships, all members are liable for the company's debts, and in a limited partnership, at least one member must still be liable.

Answer 5

Limited Liability Corporations. These entities do not pay taxes directly and allow their members to pay tax on profits directly on their income tax. They offer some tax advantage and protect the members from direct liability. They are not always high risk as someone else said.