• A Limited Liability Company (LLC) is a noncorporate business entity formed pursuant to state statute (Chapter 57C of the North Carolina General Statutes also known as the North Carolina Limited Liability Company Act) which provides its owners with protection against unlimited personal liability from creditors and third parties.
• Although other business entities offer similar protection from creditors, an LLC possesses the unique characteristic of being a "pass-through" entity for federal and state income tax purposes.
• Accordingly, all taxable revenues, gains, losses and expenses are passed through to the owners of the entity. The owners, not the entity, are solely responsible for any tax liabilities incurred during the operations of the LLC, if any.
• Often considered a "hybrid entity," an LLC blends the protections afforded business corporations with the flexibility of a partnership. Absent specific provisions to the contrary in the LLC's governing documents, the LLC has three characteristics of a partnership:
  • Owner Management - An LLC is managed by owners rather than an elected board of directors
  • Absence of continuity of life - An LLC is dissolved upon the death, incapacity, resignation, bankruptcy, or dissolution of any of its owners
  • Interests are not freely transferable - The transferee of an interest in an LLC cannot become a member of that LLC without the consent of the other members.
• Like corporate shareholders, members of an LLC have no personal liability for the debts and obligations of its respective entity. Furthermore, just as corporate shareholders can acquire personal liability by their individual acts (such as guaranteeing corporate debts), owners of LLCs can also acquire personal liability for their individual acts.

• An LLC may be formed either by filing articles of organization with the North Carolina Secretary of State or through conversion of another business entity.
• The Act requires only one person to form an LLC; however, more than one person may execute the Articles of Organization.
• The LLC becomes immediately effective upon filing by the Secretary of State and is conclusive evidence of its formation unless it is subsequently revoked, cancelled or involuntary dissolved.
• The Articles of Organization must contain the following information:
  • The name of the LLC
  • The latest date on which the LLC is to dissolve (if no date specified, then the LLC is deemed to exist in perpetuity)
  • The name and address of each person executing the Articles of Organization (and thus becoming its initial members)
  • The street address and mailing address of the LLC's initial registered office and the name of the registered agent at that address
  • If the LLC is to be manager-managed (rather than member-managed), the Articles of Organization must contain an affirmative statement that all members of the LLC shall not necessarily be managers by virtue of their status as members.

	C Corporation	Subchapter S Corporation	Limited Liability Company (LLC)	General Partnership	Sole Proprietor
Owners have limited liability for business debts	X	X	X
Must file with the state	X	X	X
Business can have a perpetual life	X	X	X
May have unlimited number of owners	X		X	X
Owners must be U.S. citizens or residents		X
May be owned by another business	X		X
May issue stock to attract investors	X	X
Owners can report business profit/loss on their personal tax returns		X	X	X	X