Who typically forms limited liability companies?

Limited liability companies (LLCs) are commonly formed by individual entrepreneurs because this business structure offers significant advantages tailored to the needs of small business owners. LLCs allow entrepreneurs to combine the benefits of pass-through taxation with limited liability protection. This means that the personal assets of the owners are generally protected from business debts and liabilities, a critical feature for individuals starting their own businesses.

In addition, forming an LLC is relatively straightforward and flexible, making it an attractive option for entrepreneurs looking to establish their businesses without the complexities that larger corporate structures may entail. While investors can be involved in an LLC and large corporations might form them for specific projects, the primary creators of LLCs are often those who are actively managing and operating the business themselves, which aligns closely with individual entrepreneurs.