A limited liability corporation can be defined as a unique legal business unit generated from an amalgamation of the various characteristics of partnership and corporation. It has a separate existence distinct from other business models like sole proprietorship, partnership and corporation. Although this concept is novel for United States, it has long been adopted in various other countries. This distinctive business model has been adopted from the German GmBH model.

All the 50 states in the United States allow the formation of limited liability corporations, although the laws governing them in each state may be distinct. Certain jurisdictions, for example, allow only legal practitioners and lawyers to form such corporations. In some states, banks or farms are not allowed to form limited liability corporations.

A limited liability corporation is an exclusive business structure which provides the personal liability shield or limited liability protection found in a corporation. It provides taxation advantages (no double taxation) as well as the flexible ownership, investment, control, management and free flow of profit and loss characterizing partnerships.

Limited liability entails the observation of less formality than that observed in a corporation, and relatively more formalities than sole proprietorship. Limited liability corporations are also defined as a legal company or business enterprise set up by filing the article of organization with the proper statutory authority of the state, thereby giving the members the advantage of limited liability as well as protecting them from double taxation (individual tax and company tax).

Limited liability corporations, like conventional corporations, do not hold the members liable for the losses, debts or bankruptcy of the business entity. Hence the members are not held individually or personally liable unless there are personal guarantees or fraud. Unlike corporations, limited liability corporations do not provide the option of transferability of membership, continual existence, and single ownership when there is more then one member.

Limited liability companies are also defined as a US corporate body which resembles the GmbH German model, where the membership and share holding is not transferable in the absence of unanimous consent of all the members. An operating agreement drafted by all the members determines the smooth functioning of the corporate structure. All members have the right of participation in managerial meeting.