A limited liability company (LLC) is a flexible US business structure that blends the liability protection of a corporation with the tax simplicity of a partnership or sole proprietorship. Owners, called members, are shielded from the company's debts, but the entity itself usually pays no federal income tax.
By default an LLC is a pass-through: a single-member LLC is taxed like a sole proprietorship and a multi-member LLC like a partnership, with profits reported on the members' personal returns. Crucially, an LLC can also elect to be taxed as an S corporation or a C corporation, which is why many owners use it as a tax-planning wrapper. Members are generally self-employed and pay self-employment tax on their share of profits.
Example: two founders split a 120,000 dollar profit LLC 50/50; each reports 60,000 dollars on their own 1040 and the LLC files an informational return but pays no entity tax.
Outside the US the nearest cousins are the UK Ltd, the German GmbH and the Italian SRL, though those are taxed as companies rather than pass-throughs. Model an S-corp election with our US S corporation tax calculator.