Key takeaways
- Single-member LLC: One person owns the business. Best for freelancers, consultants, and solo business owners. Generally classified as a disregarded entity by default, with income reported on Schedule C of Form 1040. Available in all states.
- Multi-member LLC: Two or more people own the business. Best for co-founded businesses, family businesses, and other partnership-based ventures. Classified as a partnership by default, with the LLC filing Form 1065 and members receiving Schedule K-1s. Available in all states.
- Professional LLC (PLLC): Licensed professionals own and operate the business. Best for practices in fields such as law, medicine, and accounting. Default federal tax treatment follows the standard single-member or multi-member LLC rules. Availability varies by state.
- Series LLC: One parent LLC contains separate series, each with its own assets and liabilities. Best for real estate investors, holding companies, and businesses with distinct projects. Each series may receive its own federal tax classification, generally using Schedule C of Form 1040 for one owner or Form 1065 for multiple owners. Availability varies by state.
- L3C: A low-profit limited liability company pairs a social mission with a for-profit business model. Best for social enterprises and impact-focused ventures. Default federal tax treatment follows the standard single-member or multi-member LLC rules. Availability varies by state.
- Domestic LLC: The business operates in the state where it was formed. Best for businesses that work primarily in one state. Default federal tax treatment follows the standard single-member or multi-member LLC rules. Available in all states.
- Foreign LLC: An existing LLC is registered to operate in a state other than its formation state. Best for businesses expanding into new states. Default federal tax treatment follows the standard single-member or multi-member LLC rules. Available in all states.
- Nonprofit LLC: The LLC supports a qualifying charitable or nonprofit purpose. Best for certain charitable, educational, and community-focused organizations. It is not automatically federally tax-exempt, and qualifying organizations generally apply with Form 1023 and file Form 990. Availability varies by state.
- Restricted LLC: The LLC limits distributions for 10 years after formation. Best for certain estate-planning, asset-protection, and long-term wealth-transfer strategies. Default federal tax treatment follows the standard single-member or multi-member LLC rules. Available only in Nevada.
An LLC, or limited liability company, is a business structure that has become a popular choice for entrepreneurs ready to build and grow their businesses.
The type of LLC you choose can shape how you manage ownership, handle taxes, and meet state requirements. This guide breaks down the nine types of LLCs to help you understand how each one works and choose a structure that fits your business goals.
When you’re ready to take the next step, register an LLC online via our partnership with LegalZoom.
Related: How to start an LLC
What is an LLC?
Known as a “hybrid” type of business structure, an LLC offers business owners certain protections or features usually afforded to a corporate organization alongside the streamlined simplicity you get as a sole proprietor. Here’s what makes an LLC so attractive:
- Limited liability in terms of debts and obligations
- Pass-through taxation opportunities to avoid being ‘double-taxed’
- More control and flexibility in terms of strategy and daily operations
- Simpler structures that are easy to set up
- A variety of costs can be registered as tax write offs for LLCs - here are some examples.
When setting up your LLC, it’s also important to understand what is an organizer in an LLC, as this person or entity plays a key role in officially forming your business, regardless of the type of LLC you choose.
Related: What is an Operating Agreement?
The 9 types of LLCs explained
Now that you’re up to speed with the key features and benefits of LLCs, let’s explore the nine main LLC types in more detail.
| LLC type | Members allowed | Default federal tax | Typical use case | Liability scope | State availability | Compliance burden | Can elect S-corp? |
|---|---|---|---|---|---|---|---|
| Single-member LLC | One owner | Disregarded entity; Form 1040, Schedule C/E/F | Freelancers and solo businesses | Business liabilities, subject to LLC formalities | All states | Low | Yes, if eligible |
| Multi-member LLC | Two or more owners | Partnership; Form 1065, Schedule K-1 | Co-founders and family businesses | Business liabilities, subject to LLC formalities | All states | Medium | Yes, if eligible |
| Professional LLC | Varies; licensed owners usually required | Depends on members; Form 1040 or 1065 | Licensed professional practices | Business liabilities; personal malpractice remains | Varies by state | High | Yes, if eligible |
| Series LLC | Varies by series and state | Entity-by-entity; Form 1040 or 1065 | Real estate and separate investments | Series-specific, if statutory requirements are met | Limited states | High | Yes, if eligible |
| L3C | One or more owners | Depends on members; Form 1040 or 1065 | Mission-driven for-profit ventures | Business liabilities, subject to LLC formalities | Limited states | Medium | Yes, if eligible |
| Domestic LLC | One or more owners | Depends on members; Form 1040 or 1065 | Businesses operating in formation state | Business liabilities, subject to LLC formalities | All states | Low | Yes, if eligible |
| Foreign LLC | One or more owners | Depends on members; Form 1040 or 1065 | Businesses expanding into new states | Business liabilities, subject to LLC formalities | All states, after qualification | Medium | Yes, if eligible |
| Nonprofit LLC | Varies by state and purpose | Depends on classification; exemption is not automatic | Charitable and community organizations | Business liabilities; fiduciary duties remain | Varies by state | High | Not usually |
| Restricted LLC | One or more owners | Depends on members; Form 1040 or 1065 | Estate planning and wealth transfers | Business liabilities, subject to LLC formalities | Nevada only | High | Yes, if eligible |
1. Single-member LLCs
Definition: A single-member LLC is owned by one person or one legal entity.
Who it’s for: Freelancers, consultants, online sellers, and other solo business owners.
Key advantages:
- Keeps the business legally separate from its owner.
- Allows one person to make day-to-day decisions.
- Uses a straightforward default federal tax structure.
Key drawbacks:
- Requires state filings and ongoing compliance.
- Personal and business finances must stay separate to help preserve liability protection.
- The owner carries the full responsibility for business decisions and operations.
Taxes: A domestic single-member LLC is a disregarded entity by default for federal income tax purposes. An individual owner generally reports business income and expenses on Form 1040, Schedule C, Schedule E, or Schedule F, depending on the activity, and may report self-employment tax on Schedule SE. A qualifying LLC can elect S corporation treatment with Form 2553 and file Form 1120-S, or elect C corporation treatment with Form 8832 and file Form 1120.
State availability: Single-member LLCs are available in all states.
Compliance burden: Low.
2. Multi-member LLCs
Definition: A multi-member LLC has two or more owners, called members.
Who it’s for: Business partners, family businesses, and co-founders who want to share ownership.
Key advantages:
- Allows members to combine capital, experience, and responsibilities.
- Offers flexibility in defining ownership and management roles.
- Provides the LLC structure’s liability protections, subject to applicable law.
Key drawbacks:
- Requires a clear operating agreement to reduce the chance of ownership disputes.
- Adds tax reporting and recordkeeping responsibilities.
- Members generally pay tax on allocated income, even when profits remain in the business.
Taxes: A domestic multi-member LLC is taxed as a partnership by default. The LLC files Form 1065 and provides each member with Schedule K-1, which members generally use to report their share of income, deductions, and credits on their personal returns. Members may also owe self-employment tax on applicable partnership earnings. A qualifying LLC can elect S corporation treatment with Form 2553 and file Form 1120-S, or elect C corporation treatment with Form 8832 and file Form 1120.
State availability: Multi-member LLCs are available in all states.
Compliance burden: Medium.
3. Professional LLCs
Definition: A professional LLC, often called a PLLC, is an LLC used by licensed professionals when state law permits that structure.
Who it’s for: Eligible professionals in fields such as medicine, law, accounting, and architecture.
Key advantages:
- Can provide a business structure designed for licensed services.
- May offer management flexibility within state licensing rules.
- Uses familiar LLC tax options.
Key drawbacks:
- Licensing boards may limit who can own, manage, or provide services through the business.
- State approval and documentation requirements can be more involved.
- Professional liability rules still apply to the professional who provides the service.
Taxes: PLLC status does not create a separate federal tax classification. A one-member PLLC generally follows the disregarded-entity rules and reports on Form 1040, Schedule C, E, or F, while a multi-member PLLC generally files Form 1065 and issues Schedule K-1s. A qualifying PLLC can elect S corporation treatment with Form 2553 or C corporation treatment with Form 8832.
State availability: PLLC rules vary by profession and state. California, for example, does not allow domestic or foreign LLCs to render professional services unless another law specifically authorizes it.
Compliance burden: High.
4. Series LLCs
Definition: A series LLC is a parent LLC that can establish separate series with distinct assets, liabilities, members, or business purposes.
Who it’s for: Real estate investors, holding companies, and businesses managing separate properties, investments, or projects.
Key advantages:
- Can separate assets and obligations among individual series when state law requirements are met.
- Can simplify management of related ventures under one umbrella structure.
- Allows separate ownership or investment terms for different series.
Key drawbacks:
- Asset-separation protections depend on the formation state’s law and careful recordkeeping.
- Banking, lending, and interstate registration can be more complex.
- State and federal tax treatment may require series-by-series analysis.
Taxes: Series LLCs do not use one special federal tax return. A series treated as a separate entity with one owner generally follows the disregarded-entity rules and reports on Form 1040, Schedule C, E, or F; a series with multiple owners generally files Form 1065 and issues Schedule K-1s. Form 2553 can be used to elect S corporation treatment for an eligible entity, while Form 8832 can be used to elect C corporation treatment.
State availability: Series LLC formation is only authorized in certain states. For instance, Delaware law permits LLC agreements to establish separate series, while California does not allow a series LLC to be formed there and requires a qualifying series LLC formed elsewhere to register before doing business in the state.
Compliance burden: High.
5. L3Cs
Definition: An L3C, or low-profit limited liability company, is a state-law LLC designation for businesses that prioritize a charitable or educational mission while operating as a for-profit entity.
Who it’s for: Social enterprises and impact-focused ventures with a mission-driven business model.
Key advantages:
- Places the organization’s social purpose in its legal structure.
- Uses the LLC framework for ownership and management.
- Can help explain the organization’s mission to certain mission-aligned investors.
Key drawbacks:
- Does not automatically create federal tax-exempt status.
- Does not guarantee tax benefits for investors.
- Is not available as a formation option in every state.
Taxes: L3C status does not create a separate federal tax classification. A one-member L3C generally follows the disregarded-entity rules and reports on Form 1040, Schedule C, E, or F, while a multi-member L3C generally files Form 1065 and issues Schedule K-1s. A qualifying L3C can elect S corporation treatment with Form 2553 or C corporation treatment with Form 8832.
State availability: L3C status is not available in every state. States like Illinois expressly authorize low-profit limited liability companies and set charitable or educational purpose requirements.
Compliance burden: Medium.
6. Domestic LLCs
Definition: A domestic LLC is an LLC formed and operating in its home state.
Who it’s for: Business owners operating primarily in the state where they formed the LLC.
Key advantages:
- Establishes the business under the laws of its formation state.
- Creates a clear legal home for the LLC.
- Avoids additional foreign-registration filings in states where the business does not operate.
Key drawbacks:
- State filing fees, annual reports, and compliance rules still apply.
- Doing business in another state may trigger foreign-registration requirements.
- The formation state may not be the only state with tax or licensing obligations.
Taxes: Domestic status does not determine federal tax treatment. A one-member LLC generally follows the disregarded-entity rules and reports on Form 1040, Schedule C, E, or F, while a multi-member LLC generally files Form 1065 and issues Schedule K-1s. A qualifying LLC can elect S corporation treatment with Form 2553 or C corporation treatment with Form 8832.
State availability: Available in all states. Every LLC is domestic in its state of formation.
Compliance burden: Low.
7. Foreign LLCs
Definition: A foreign LLC is an existing LLC that registers to do business in a state other than its formation state.
Who it’s for: Businesses expanding into another state or regularly conducting business outside their home state.
Key advantages:
- Allows an existing LLC to expand without forming a separate company in each state.
- Keeps the original LLC as the primary legal entity.
- Supports multistate operations when registration requirements are met.
Key drawbacks:
- May require annual reports, registered agents, and fees in multiple states.
- Adds state-specific tax, licensing, and compliance obligations.
- Requires the business to monitor each state’s definition of doing business.
Taxes: Foreign registration does not change the LLC’s federal tax classification. A one-member LLC generally follows the disregarded-entity rules and reports on Form 1040, Schedule C, E, or F, while a multi-member LLC generally files Form 1065 and issues Schedule K-1s. A qualifying LLC can elect S corporation treatment with Form 2553 or C corporation treatment with Form 8832.
State availability: Every state allows qualifying out-of-state LLCs to register, subject to each state’s requirements.
Compliance burden: Medium.
8. Nonprofit LLCs
Definition: A nonprofit LLC is a limited liability company that can carry out charitable or community-focused work without distributing profits to private owners.
Who it’s for: Certain charitable, educational, religious, and community-focused organizations.
Key advantages:
- Can offer LLC governance flexibility for eligible organizations.
- Can support a mission-driven purpose.
- May qualify for federal tax exemption if it meets IRS requirements.
Key drawbacks:
- Tax-exempt status is not automatic.
- State law, IRS rules, and organizational documents must work together.
- Eligibility and governance requirements can be more restrictive than a standard LLC.
Taxes: A nonprofit purpose does not change the LLC’s default federal tax classification. A qualifying organization seeking recognition of exemption under Section 501(c)(3) generally applies with Form 1023. Recognized tax-exempt organizations generally file Form 990, Form 990-EZ, or Form 990-N, as applicable. LLCs that do not receive or maintain tax-exempt status follow the standard LLC tax rules.
State availability: State rules for nonprofit LLCs and federal tax-exemption eligibility vary.
Compliance burden: High.
9. Restricted LLCs
Definition: A restricted LLC is a type of Nevada LLC that limits distributions to members for 10 years after its formation or its election to restricted status.
Who it’s for: Certain estate-planning, asset-protection, and long-term wealth-transfer strategies.
Key advantages:
- Can support long-term planning goals.
- Uses a structure created specifically for restricted distributions.
- Can be customized through its articles of organization and operating agreement.
Key drawbacks:
- Limits access to distributions for an extended period.
- Requires specialized legal and tax planning.
- Has a narrow use case for most small business owners.
Taxes: Restricted LLC status does not create a separate federal tax classification. A one-member restricted LLC generally follows the disregarded-entity rules and reports on Form 1040, Schedule C, E, or F, while a multi-member restricted LLC generally files Form 1065 and issues Schedule K-1s. A qualifying LLC can elect S corporation treatment with Form 2553 or C corporation treatment with Form 8832.
State availability: Not available outside of Nevada.
Compliance burden: High.
How to choose an LLC type for your business
Every business has different needs, but a few common situations can help narrow your options. Use the examples below to see which LLC type may align with your ownership structure, industry, goals, and where you plan to operate.
- Work in a licensed profession. A professional LLC, or PLLC, may be the right fit if your state and licensing board allow it. Continue to the next step if your business does not provide licensed professional services.
- Serve a charitable or mission-driven purpose. A nonprofit LLC may fit an organization pursuing tax-exempt status, while an L3C may fit a for-profit business with a strong social mission. Both options have state-specific requirements.
- Need to separate multiple assets or business lines. A series LLC may work for real estate investors, holding companies, or businesses managing distinct projects. This option is only available in certain states and requires careful recordkeeping.
- Use a Nevada estate-planning structure. A restricted LLC may support long-term wealth-transfer planning in Nevada. This specialized LLC generally limits distributions to members for 10 years.
- Decide how many people will own the business. A single-member LLC has one owner, while a multi-member LLC has two or more owners. This choice also determines the LLC’s default federal tax treatment.
- Identify where the business will operate. Your LLC is domestic in the state where you form it. Register as a foreign LLC in additional states where the business has sufficient activity to require registration.
LLC type example scenarios
Below are a few scenarios in which different types of LLCs may be the best fit.
Scenario 1: Solo graphic designer
A designer working independently in one state may choose a single-member domestic LLC. This structure keeps ownership simple while creating a separate business entity and providing liability protection.
Scenario 2: Two friends opening a retail business
Two co-founders opening a local store may choose a multi-member domestic LLC. An operating agreement can outline ownership percentages, responsibilities, and how profits are shared.
Related: Do you need an LLC for ecommerce?
Scenario 3: Medical practice
A group of licensed physicians may need a PLLC, depending on their state. Professional licensing rules often determine who can own and manage the practice.
Scenario 4: Rental property investor
An investor with several rental properties may consider a series LLC if their state allows. Each series can hold a separate property, but the structure requires careful recordkeeping and state-specific legal guidance.
Disclaimer: This content should not be construed as legal or financial advice. Always consult an attorney or financial advisor regarding your specific legal or financial situation.
FAQs
What is the best type of LLC to have?
The best type of LLC is one that matches your business’s ownership, industry, and growth plans. Many entrepreneurs choose a single-member or multi-member domestic LLC, but certain businesses may need a PLLC, series LLC, or foreign LLC. State rules and tax considerations can help confirm the right fit.
What type of LLC is most common?
Domestic single-member LLCs are the most common form of limited liability company. However, that doesn’t automatically mean it’s the right type of LLC for your business.
How should I categorize my LLC?
Categorize your LLC based on its ownership, business purpose, industry, and the states where it operates. A business may fall into more than one category, such as a single-member domestic LLC that is also registered as a foreign LLC in another state.
What are the three main disadvantages of an LLC?
Three common disadvantages of an LLC include ongoing state fees and paperwork, self-employment taxes for active members, and fewer fundraising options than a corporation.
