A Limited Liability Company, or LLC is a legal form of business organization with daily activities like a partnership but with limited liability similar to a corporation. An LLC is formed in the state in which it operates. An LLC is formed by filing Articles of Organization with the state in which you will be doing business. (A few states use a Certificate of Organization to form an LLC.)
An LLC is sometimes incorrectly referred to as a Limited Liability Corporation. Although an LLC can be taxed as a corporation (see below), an LLC is not formed as a corporation.
The owners of an LLC are called "members" rather than partners or shareholders. The members draw up an operating agreement (similar to a partnership agreement) by which they run the LLC. A single-member LLC is taxed as a sole proprietorship, while a multiple-member LLC is taxed as a partnership.
An LLC is not recognized as a taxing entity by the IRS. Instead, LLCs are taxed based on the number of members. If the LLC has one member, it is taxed as a sole proprietorship. If the LLC has more than one member, it is taxed as a partnership. The LLC can also choose to be taxed as a corporation.