The term limited liability company or “LLC” refers to one type of entity structure. Every state has different types of LLCs, so we wanted to shed some light on the various LLC types.
An LLC can come in many shapes and forms. At its core, an LLC is a business entity owned by one or more “members”. An LLC is typically created to operate a business or own assets. The most discussed benefit of an LLC is the liability protect afforded to its owners for the liabilities associated with the LLC business or LLC assets. This liability protection is sometimes referred to as a “veil” or firewall. While this is an important benefit that that LLC provides, there are many other LLC benefits that you may want to review.
Every state has authorized the use of LLCs. A Traditional LLC is the most common type of LLC and includes any LLC that is not a Series LLC, Professional LLC, or Foreign LLC.
A Series LLC is an LLC that can create “series” or cells to own assets or do business. The Series LLC (or Master LLC) is technically just one LLC, but once the first series is created under the Master LLC, it looks and feels a lot like multiple LLCs. The assets owned by one series are not at risk or subject to the liabilities of the Master LLC or another series. Only a handful of states have authorized the use of Series LLCs.
A Professional LLC (PLLC) is typically required when the sole purpose of the business is to provide services that require a license to perform (i.e. law firm, accounting firm, medical or dental practice, etc.).
An LLC that is formed in one state and registered in another is referred to as a Foreign LLC in the states in which the LLC secondarily registers. For example, if you create an LLC in Delaware and then register the DE LLC in New York, the DE LLC would be called a Foreign LLC in New York. Essentially, a Foreign LLC is the proper name for an out-of-state LLC.
An LLC can elect to be taxed as an S-Corporation and this arrangement often referred to as an “S-Corp LLC”. LLCs can elect to be taxed as both an S-Corp or C-Corp. If no election is made, the default rules apply (i.e. a single-member LLC is taxed like a sole proprietorship and a multi-member LLC is taxed like a partnership). The most common alternative to the default tax classification is to be taxed as an S-Corporation.
The owners of an LLC are called “members.” As such, an LLC that has one member/owner can be referred to as a single-member LLC.
As you know, a “member” is synonymous with “owner”. So a “multi-member LLC” would be an LLC with multiple owners.