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Massachusetts Attorney

The limited liability company or LLC is not a partnership or a corporation. An LLC is a distinct type of business that offers an alternative to partnerships and corporations, by combining the corporate advantages of limited liability with the partnership advantage of pass-through taxation. Beacause of a new law passed in Massachusetts in March 2003, a single person can start up an LLC. The business decisions of an LLC are made by the members unless the articles of organization provide that the LLC will controlled by a manager or managers.

LLC advantages

Pass-Through Taxation
LLCs allow for pass-through taxation. This means that earnings of an LLC are taxed only once. The earnings of an LLC are treated like the earnings from a partnership, sole proprietorships and most S corporations.
Limited Liability
The LLC owner's liability is generally limited to the amount of money which the person has invested in the LLC. Thus, LLC members are offered the same limited liability protection as a corporation's shareholders.
Flexible Management Structure and Flexible Ownership is Permitted
Like general partnerships, LLCs are generally free to establish any organizational structure agreed on by the members. Thus, profit interests may be separated from voting interests.

Disadvantages of the LLC include:

More Paperwork - than an ordinary Partnership (but much less than a corporation)
Documents must be filed at the state level to create an LLC, which is not the case with a general partnership.
Dissolution Date
Some states require that a dissolution date be listed in the articles of organization. This date may be amended. Further, certain events, such as death of a member, a member leaving, bankruptcy, etc. can be a dissolution event. A corporation has unlimited life and these events are not dissolution events for a corporation.
Newer Entity Type
The LLC is a newer entity, and people are not as familiar with the LLC as a corporation.
Annual Filing Fee
Massachusetts requires an annual filing fee of $515

LLC's vs. Sub S Corporations

While the S corporation's special tax status eliminates double taxation, it lacks the flexibility of an LLC in allocating income to the owners. An LLC may offer several classes of membership interests while an S corporation may only have one class of stock. Any number of individuals or entities may own interests in an LLC. However, ownership interest in an S corporation is limited to no more than 75 shareholders. Also, S corporations cannot be owned by C corporations, other S corporations, many trusts, LLCs, partnerships, or nonresident aliens. LLCs are allowed to have subsidiaries without restriction. S corporations are not allowed to own eighty percent or more of another corporation's shares.