Limited Liability Company (LLC)
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Today's lesson, which does put more of me in your life, deals with the term LLC which stands for Limited Liability Company and there is a little bit of confusion regarding this term primarily because the term means different things in different regions. In the United States for example, a LLC, a Limited Liability Company, refers to a specific type of corporation. A company which is limited by shares but also is limited in terms of how big it can be. It's limited in terms of how many shareholders it can have, how many directors in some states and the amount of share capital is also restricted. So it's really referring to a smaller, almost in terms of a closely held corporation which enables LLCs to be taxed differently, to be taxed like a partnership to get what they call passed through taxation. For that reason it's an extremely preferred form of corporate governance of company in the United States because you get the limited liability aspects of a company and you get the benefits tax wise with the passed through taxation.
The confusion lies in the rest of the world and let's take the UK for example in which if someone refers to a Limited Liability Company they're really just referring to any sort of limited company, a company limited by shares, and it really has no bearing whether you call it a Limited Company or a Limited Liability Company in the UK. You're really referring to the same type of company in the sense that it's a company limited by shares so that's where the confusion comes into play.
Our advice here, because there is this distinction in the United States, is to avoid saying LLC or Limited Liability Company unless you are specifically referring to the US company form.
If you are referring just to a company limited by shares in general, you can take out the second liability and just refer to them as limited companies. This would distinguish a regular ordinary company limited by shares from an LLC.
So, again, it's an example, a Legal English example where the same terms can mean slightly different things in different jurisdictions and can get you in some trouble.
So keep this in mind and hopefully this was helpful, and again, keep those comments coming in the spaces below and all throughout the site. Thanks.