What Does LLC Mean on the End of a Company Name?

By River Braun, J.D.

What Does LLC Mean on the End of a Company Name?

By River Braun, J.D.

LLC is an abbreviation for a business entity known as a limited liability company. It's used at the end of a business name to identify its type. States have restrictions and rules for the use of this acronym. Owners can usually find information about company naming conventions on the Secretary of State's website in the state they intend to register the business.

Man pressing word "LLC" in hexagon on futuristic glass touchscreen surrounded by other images in hexagons

These types of companies have been in use in the United States for roughly 40 years; however, the business structure has been slow to catch on in many states. And since states oversee their formalities, the formation and operation of LLCs can vary slightly between states.

Basics of a Limited Liability Company

An LLC combines many of the features of a corporation or partnership, such as limited risk for owners and certain tax benefits. However, these entities are more flexible and easier to operate than a corporation. They do not have the same level of formality and requirements for government reporting and record keeping as corporations.

The first state to enact laws for limited liability companies was Wyoming in 1977, even though the business structure had been used in Europe for much longer. Many states were concerned about how the Internal Revenue Service (IRS) would tax income generated by these companies. Today, these businesses may choose to pay taxes as a corporation, partnership, or sole proprietorship.

Some states don't allow certain businesses to operate as a limited liability company, such as credit unions, trusts, insurance companies, or banks. For example, California does not allow attorneys, doctors, and accountants to operate under this umbrella, primarily because it would be against public policy to limit liability for a professional with a fiduciary duty to act in accordance with the rules and regulations governing their actions. Furthermore, companies that are LLCs are prohibited from including certain words in their business name that would imply the company is conducting the same type of business as a business that's not permitted to form an LLC.

The Benefits of Limited Liability

One of the main reasons many business owners decide to form an LLC is to limit personal liability for business debts and business actions. Owners, also referred to as members, are not responsible for the company's debts unless they sign a personal guarantee. Therefore, a creditor cannot attempt to seize or levy the personal assets of a member without a signed, valid personal guarantee from them.

However, they do not offer the same level of protection for members as corporations provide for shareholders. Members can, at times, be responsible for company debts or actions if the court determines it is just and reasonable to pierce the corporate veil. In addition, they may be made parties to civil lawsuits or tort actions.

An easy way to reduce the potential of liability is to keep personal and business finances separate. Even though an LLC does not have the same requirements to record meetings and minutes, it should keep detailed and accurate books and records to avoid problems of personal liability.

If you are ready to form an LLC, keep in mind that you generally must designate this acronym at the end of your business name. You can find the applicable rules and regulations regarding formation of your business on your Secretary of State's website.

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