About Limited Liability Companies
Limited liability companies (LLCs) are non-corporate businesses whose owners are generally protected against personal liability for the organization's debts and obligations. The LLC is a hybrid legal entity that has characteristics of a corporation and a partnership. An LLC provides its owners with corporate-like protection against personal liability. It is, however, usually treated as a non-corporate business organization for tax purposes, unless the LLC elects to be treated otherwise.

The owners of an LLC are called “members” and are similar in some respects to shareholders of a corporation. A member can be a natural person, a corporation, a partnership, or another legal association or entity. An operating agreement typically provides, among other things, the procedures for admitting new members, outlines the status of the LLC upon a member's withdrawal, and the procedures for dissolution of the LLC.

Most state LLC statutes specifically provide that members of an LLC are not personally liable for the LLC's debts and obligations. This limited liability is similar to the liability protection for corporate shareholders, partners in a limited partnership, and partners in a limited liability partnership.

The IRS generally treats the LLC as a partnership for federal income tax purposes unless the LLC elects to be treated otherwise. As such, the LLC's members are taxed only on their share of LLC profits. Any gains, losses, credits, and deductions flow through the LLC to the members, who report them as income and losses on their personal tax return.

Membership Interests
Members of an LLC contribute capital to the LLC in exchange for a membership interest. A member of the LLC possesses a membership interest, which is considered personal property and may, unless restricted by the terms of the operating agreement, be freely transferred to nonmembers or to other members, provided that if a member assigns or sells a membership interest to another person, that other person typically receives only the right to the assigning member's share of profits and distributions in the LLC and not any other rights as a “member” of the LLC. Persons who receive a membership interest from an existing member are not able to participate as voting members or managers unless they are admitted as new members.

The LLC's operating agreement provides the circumstances under which a person may be admitted as a new member. The admission of a new member requires the unanimous consent of the managing members.