Saturday, April 20, 2013

What Does LLC Stand For?

Many ask the question of What Does LLC Stand For? They are usually looking for one of two answers: (i) what do the actual letters stand for and where did it come about; or (ii) what benefits and features does an LLC provide?

LLC Stands for Limited Liability Company

The LLC is a creature of state laws. In 1977, Wyoming was the first state to enact a law that gave birth to a limited liability company. Since then, every state in the United States has passed a set of laws which allow for a legal entity called a limited liability company to be created under the law.

The main reason the LLC was born is because small business owners needed a legal entity that was more catered form them as compared to the corporation entity which was more suitable for larger businesses.

Lawmakers want to encourage small business as it drives our economy and creates jobs. Accordingly, what the LLC provides is a legal entity which provides benefits that are specifically tailored for the small business owner but also has the flexibility to accommodate larger businesses as well.


The LLC provides business owners with a shield of protection. Owners are not personally liable for the debts and obligations of the business. In addition, this type of legal entity offers a single layer of taxation which minimizes taxes for owners and even allows active members to take a deduction against other income if the business generates losses.

The benefits do not end with protection and taxes. The limited liability company also allows flexibility for business owners to tailor who they want their business to operate and be managed. You are not forced to fit into a one size fits all governance structure.

Business owners want to spend their time building their business and not maintaining legal entities or having to keep up with legal compliance requirements. LLC laws were specifically designed to make the use of this vehicle easy. There are minimal requirements to form and maintain a limited liability company.

Another benefit is that the use of a legal entity for a business conveys a more professional and official image. Customers see that the business is a limited liability company and know that the owners of the business engaged in some serious business planning. This is great for getting more business.

So, when one asks what does LLC stand for, the answer is that it stands for the most popular legal entity vehicle for small business. For the low cost to form one, a business owner gets tremendous benefits and advantages.

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