An LLC is an alternative type of business entity. An LLC is like a corporation in that it limits the liability of the owners. It’s also like a partnership regarding the flexibility of dividing profit among the owners. An LLC can elect to be treated either as a partnership or as a corporation for federal income tax purposes. An LLC can have one owner or more than one.
The key advantage of the LLC legal form is its flexibility, especially how profit and management authority are determined. The owners of an LLC must enter into a very detailed agreement that spells out the division of profit, the division of management authority and responsibility, their right to withdraw capital, and their responsibilities to contribute new capital as needed.
It is advisable to consult a tax expert before making the choice to form an LLC.