Limited Liability Corporation - LLC and Taxes- An LLC is not a separate tax entity like a corporation; it is what the IRS calls a pass through entity, like a partnership or sole proprietorship. All of the profits and losses of the LLC pass through the business to the LLC owners , who report this information on their personal tax returns. The LLC itself does not pay federal income taxes, but some states do charge the LLC itself a tax. So if you form an LLC in Delaware, Maryland,Wyoming, Michigan, Nevada, California, New York please check with your State of choice.
The LLC is a relatively new type of hybrid business structure that is now permissible in most states. It is designed to provide the limited liability features of a corporations and the tax efficiencies and operational flexibility of a partnership. Formation is more complex and formal than that of a general partnership.
The owners are members, and the duration of the LLC is usually determined when the organization papers are filed. The time limit can be continued if desired by a vote of the members at the time of expiration. LLC's must not have more than two of the four characteristics that define corporations: Limited liability to the extent of assets; continuity of life; centralization of management; and free transferability of ownership interests.