A limited liability corporation refers to a business unit that has acquired a unique legal structure. It is different from other forms of business structures, like sole proprietorships, partnerships and corporations. It provides the advantages of a partnership or corporation, while being shielded from the disadvantages of these business structures. It is thus a distinct legal business entity, which has risen from a cross between a partnership and corporation. The concept has been around for a long time but it is new to the United States. It is available now in all 50 states in United States, as well as other Anglophone countries. There may be differences, however, regarding fees, and set-up costs, based upon the law in various jurisdictions.

A limited liability corporation is also referred to as a limited liability company. Being a unique amalgamation of various characteristics of corporations and partnerships, it has become a favored business entity for new entrepreneurs and investors. This structure provides the limited liability protection of a corporation without the restrictive conditions imposed on ownership and investment that feature in corporations. The company is an individual unit and the members are not held responsible for the company's debts or losses (unless fraud is committed or a personal guarantee is provided), like it is in case of a corporation.

The individual owners are called members, and there is no constraint on the number or type of ownership. It is a more informal set-up, with flexible control and management mechanisms followed by the members. Unlike a corporation, there is no necessity of meetings at regular intervals, maintenance of minutes or resolution records. It offers protection from double taxation, and the profits, losses and dividends are shared by the members in proportion to investment.

It offers the advantages of a partnership without the insecurity of profound personal liability in the event of bankruptcy or cessation. It provides the freedom of an informal set-up with planning, distribution and allocation elasticity. The main disadvantage is that it doesn't provide the benefit of continual life in advent of death of member, dissolution or bankruptcy, unless otherwise stated in the operating agreement.

Difficulties may arise out of the reluctance of investors to put in their money in a company with limited liability. Issuing public or employee shares is not possible, in case the corporation grows and seeks to become a public enterprise. The formalities and agreements may be more daunting and complex than in a sole proprietorship. Difficulties may arise out of classification into a partnership or corporation by default or election. However, limited liability corporations are an extremely viable option for many entrepreneurs, given their obvious advantages.

Setting up a limited liability corporation requires the filing of an article of organization form with the secretary of state of the specific jurisdiction, and payment of the filing fees. Apart from this, an operating agreement, drafted by all members, can be in a written or oral format. This is not a mandatory agreement; however, it helps to ease out the various operational difficulties that may rise due to ownership issues, transfer of membership, distribution of profits, etc.