A legal entity that separates your personal assets from business liabilities while allowing pass-through taxation.
An LLC is the most common business entity for small businesses and early-stage companies. Forming one creates a legal wall between you personally and the business: if someone sues the business or it can't pay its debts, your personal savings, car, and home are generally protected. Without an LLC (or another entity), you're a sole proprietor, which means the business and you are legally the same person.
LLCs are governed by an Operating Agreement, not a Board of Directors. Members hold "membership interests" rather than shares of stock. This flexibility makes LLCs attractive for bootstrapped businesses, consultancies, and service-based companies. However, most venture capital funds are legally restricted from investing in LLCs, so startups planning to raise institutional money typically form as Delaware C-Corporations instead.
You form an LLC by filing Articles of Organization with your state's Secretary of State and paying a filing fee (typically $50–$500). Most states allow online filing. Once formed, you should obtain an EIN, open a business bank account, and draft an Operating Agreement even if your state doesn't require one.