What Is a Limited Liability Company (LLC)?
A Limited Liability Company (LLC) is one of the most common legal forms of doing business, chosen by entrepreneurs for its flexibility and protection. It is a corporate entity where the liability of shareholders is limited to the amount of their contributions to the share capital. Unlike partnerships, an LLC has its own legal personality, meaning it can own assets, enter into contracts, and be sued independently of its owners. This structure is widely used for small and medium-sized businesses as well as foreign investors seeking a secure and regulated framework for operations.
Key Aspects of the Concept
- Provides limited liability for shareholders, shielding personal assets from business debts.
- Requires a minimum share capital (depending on jurisdiction) contributed by owners.
- Governed by articles of association that regulate internal corporate governance.
- Shareholders’ rights and duties are strictly defined by law and corporate documents.
- Managed by a board of directors or management board, responsible for daily operations.
- Taxation depends on jurisdiction, but LLCs often benefit from corporate tax structures.
- Preferred for foreign investment due to its predictability and investor protections.
Examples of the Term “Limited Liability Company” in Use
- Two partners decided to establish a Limited Liability Company to protect their personal assets while running a new e-commerce venture.
- The investor transferred €50,000 into the company’s share capital to form a Limited Liability Company.
- A Limited Liability Company was chosen over a sole proprietorship because of its tax benefits and risk protection.
- International businesses often set up Limited Liability Companies to comply with local commercial laws and attract outside investors.