Explained: The Different Types of LLCs - How to Start my LLC

Types of LLCs

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Carolyn Young has over 25 years of experience in business in various roles, including bank management, marketing management, and business education.

Reviewed by: Sarah Ruddle

For over 15 years, Sarah Ruddle has been a noteworthy leader in the business and nonprofit world.

Types of LLCs

Types of LLCs

A limited liability company (LLC) is one of the country’s most common US business structures and offers several benefits for business owners. But did you know that there are several LLCs to choose from? 

Depending on the nature of your business, you can form a certain kind of LLC to reap the most benefits. This guide covers the various types of LLCs to help you make the right decision. 

Single & Multi-Member LLCs

If you form an LLC and are the sole owner, or member, you will have a single-member LLC. On the other hand, if you’re forming an LLC with one or more partners, you’ll be forming a multi-member LLC.

LLC members can be individuals, corporations, or other LLCs. In most cases, members have made capital contributions to the LLC or gained a share of ownership through their role in starting or running the company. 

A member’s ownership share is generally based on the amount of their contribution, but it can be divided in any way the members agree upon. All members get a share of profits based on their ownership share, voting rights, and other rights defined in the operating agreement.

An LLC can have unlimited members unless it chooses to be taxed as an S-Corp. In this case, the LLC can have no more than 100 members. 

LLC members should be listed in the operating agreement.

Foreign LLC

If you plan to do business in your home state and another state, you should register as a foreign LLC in the new state. A foreign LLC is an LLC doing business in a state other than the one in which it was initially formed.

For instance, if a T-shirt-selling LLC formed in Nebraska wishes to start doing business in Oklahoma, it must register as a foreign LLC in Oklahoma – and abide by the laws and regulations of both states.

Registering as a foreign LLC is similar to forming an LLC in your home state. Be sure to check the new state’s procedures.

Series LLC

A series LLC is a type of LLC with a structure that’s considerably different from a standard LLC. In a series LLC, the articles of formation allow the membership interests, assets, and operations to be broken into distinct business entities, which are called series. 

These business entities act independently within the master, or umbrella, LLC and can have different members, managers, rights, and obligations. A series LLC, for instance, could consist of a T-shirt business, a consulting firm, and a coffee shop – each with its members and management structure. 

Because each series under the umbrella acts independently, they can hold titles to property, enter into contracts, and sue or be sued individually. 

Low-Profit LLC (L3C)

A low-profit limited liability company, known as an L3C, is essentially a combination of an LLC and a nonprofit. The goal of an L3C is to make money alongside a social purpose or public benefit, such as fighting climate change.

To be an LLC, your business must meet the following requirements. 

  • Serve at least one charitable or educational purpose within Sec. 170(c)(2)(b) of the Internal Revenue Code and have been formed for the accomplishment of that purpose
  • Production of income or appreciation of property is not a significant purpose. 
  • The accomplishment of political or legislative goals is not among its purposes.

For an L3C, the social purpose needs to be the primary goal, while profit is secondary. Profit is mainly a means to achieving the stated end or social benefit. Also, your social purpose cannot be political, such as lobbying for a certain right or law. 

As of late 2022, only some states and territories allow the formation of L3Cs: Illinois, Kansas, Louisiana, Maine, Michigan, Missouri, North Dakota, Rhode Island, Utah, Vermont, Wyoming, Puerto Rico, and the federal jurisdictions of the Crow Indian Nation of Montana and the Oglala Sioux Tribe.

L3Cs can legally operate in any state but can only be formed and registered in the aforementioned jurisdictions.

Rules vary regarding how L3Cs can operate in states that don’t recognize the L3C structure. For example, some states will grant a certificate of authority for a foreign LLC, while others require that you register as a foreign LLC. Check with the states where you plan to operate to see what’s required. 


A professional limited liability company (PLLC) is a type of LLC meant for licensed professionals, such as lawyers, doctors, and architects. Like LLCs, PLLCs, which are not available in all states, also offer limited liability protection. 

One difference between PLLCs and LLCs is that the state’s licensing board must verify the license of the professional seeking to form a PLLC and approve the articles of organization.

PLLC members must be in a profession requiring a license or certification from the state, but this needs to be clarified in all states. 

Some states list the professions that can have a PLLC, while in others, it’s more of a gray area. Typical professions that can form a PLLC include:

  • Physicians, dentists, and other medical professionals
  • Pharmacists
  • Therapists
  • Attorneys
  • Accountants
  • Engineers
  • Architects
  • Real Estate Agents
  • Social Workers

Family LLC

A family LLC is a standard LLC with family members as owners, usually with one member acting as a manager. This entity is often formed for asset protection and estate planning.

Asset Protection

With a family LLC, the LLC members are the family members, and profits are allocated as they wish. 

A personal residence cannot be an asset of a family LLC. But family members can put a wide variety of personal assets, such as investment accounts, rental properties, valuables, jewelry, or even a business, into the family LLC as capital contributions. 

Then, if an LLC member has a personal financial obligation to a creditor or is sued, the assets, since the LLC now owns them, are protected from being seized to fulfill those personal obligations. 

Estate Planning

In most cases, parents form the family LLC and act as managing members. Children and other family members are LLC members but are restricted from withdrawing or transferring their financial interests. 

When assets are placed in an LLC, a market value is assigned to those assets. However, members often choose to give LLC assets a discounted value of maybe 60 percent of the market rate. This reduced value lowers estate and gift tax obligations. 

A family LLC also allows you to control distributions to members before and after the death of the managing members. How and when distributions are made is usually specified in the operating agreement.


As you can see, you could choose several types of LLCs for your business structure. It’s important to consider the nature of your business and your long-term plans and goals to make the best decision. Whichever type of LLC you choose, consider working with an attorney to ensure the formation process runs smoothly.