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An Entity with a Lot of Freedom

The abbreviation "LLC" stands for Limited Liability Company. Earlier the primary advantage of the LLC was made clear: as with the Corporation, the LLC protects largely the personal assets of the founder. And, the liability is generally limited to the company's assets. In addition, the LLC offers companies a lot of latitude in deciding how to be an entrepreneur of the structured company. The “LLC” name, and the liability regime, suggest a similarity between the LLC and the German GmbH. In some cases this assumption is true but there are important differences.

  • The establishment of a U.S. LLC with no minimum capital is possible, however, the LLC is more similar to the German GmbH than it is to the German Mini GmbH ("Unternehmergesellschaft UG").
  • In addition, the GmbH in Germany is classified as a corporation. However, in the U.S., the founder of a LLC can choose freely whether the LLC is formed as a corporation or as a partnership. However, if the founder with the LLC is doing business in Germany, it does not necessarily mean that this classification will be accepted by the German tax authorities. 
  • The German company has statutory bodies such as the CEO, the Shareholders Meeting and, under certain conditions, a Supervisory Board. The LLC, however, has virtually no fixed branches. 

The Owners - "Members"

The LLC consists of its members, which are the shareholders or owners of the company. In a so-called single-member LLC, there is only one owner, while the multi-member LLC is a company with multiple owners. A distinction is also based on the type of LLC which its management has organized.

  • Member Management: The so-called "member management" is basically management by all shareholders of the company.
  • Manager Management: Of the delineated "manager management,” one owner is responsible for the management of the company. The other owners are not involved in the management. With active and passive partners, the management of the LLC is similar to "manager management" with a classic German limited partnership. However, when the LLC is also the managing owner of a limited liability company, the managing general partner of a limited partnership are general partners.
  • Another variant of a LLC is also that the owners can decide not to hold any position in management. The owners then decide on a certain person as the manager.

The LLC allows its founders great freedom in designing their company. It is still a relatively new form of enterprise in the United States. In 1977 Wyoming was probably the first U.S. state to officially allow the LLC as a corporate form. Today the formation of a LLC is possible in all the U.S. states.  




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