What is an LLC?
An LLC (Limited Liability Company) is a hybrid U.S. business entity that combines the limited-liability protection of a corporation with the operational flexibility and pass-through tax treatment of a partnership. LLCs are creatures of state law — most commonly Delaware, Wyoming or the state of operations — and are governed by an Operating Agreement among the members.
Key features
LLCs offer (i) limited liability: members are generally not personally liable for company debts; (ii) flexible management: member-managed or manager-managed structures; (iii) customisable governance: economic and voting rights can be tiered freely in the Operating Agreement; and (iv) tax flexibility: by default, single-member LLCs are disregarded and multi-member LLCs are taxed as partnerships, but an LLC can elect corporate treatment by filing IRS Form 8832 (or S-corporation status via Form 2553).
Formation
An LLC is formed by filing a Certificate of Formation (Delaware) or Articles of Organization (most states) with the secretary of state, appointing a registered agent, paying franchise/annual tax, obtaining an EIN from the IRS, and adopting an Operating Agreement. Most operating documents are private and not publicly filed.
LLC vs. corporation for startups
U.S. tech startups raising institutional venture capital almost always use a Delaware C-corporation rather than an LLC, because institutional investors prefer the standardised stock-based capital structure, qualified small business stock (QSBS) treatment under Section 1202, and clean Section 83(b) mechanics for equity compensation. LLCs are common for holding companies, joint ventures, real-estate vehicles, fund subsidiaries and closely-held businesses.
Considerations for non-U.S. members
Non-U.S. members of a U.S. LLC need to consider U.S. tax filing obligations (effectively connected income, withholding under Sections 1446 and 1441/1442), home-country reporting, and the practical inability of some non-U.S. owners to obtain favourable treaty treatment compared with a U.S. C-corporation. Many cross-border structures use a U.S. C-corporation or a Delaware LP instead.