• The Internal Revenue Service describes a Limited Liability Company (LLC) as "a business structure allowed by state statute." LLCs have become popular across the United States because the owners of such companies, commonly referred to as members, hold limited personal responsibility for the actions of the LLC or the debts it incurs while doing business.
  
  

Businesses Eligible for LLC Status

• LLC companies exist in almost every business industry and can be owned by corporations, partnerships or individuals. With a handful of exceptions, the majority of small businesses are eligible for LLC status. Each state sets its own specific limitations and qualifications for LLC companies, so there is no nationwide standard for granting LLC status to a business.
  
  

Businesses Not Eligible for LLC Status

• According to the IRS, businesses such as banks, insurance companies and nonprofit organizations are typically not eligible to become LLCs. However, individual limitations and qualifications vary by state and some companies may qualify for LLC status in one state, only to be denied LLC status in another.
  
  

Legal Protection

• Although LLC members have been granted limited liability, Tricia Davis, an attorney for Bernstein Law Firm, explains legal risks involved with LLCs in her article "Limited Liability Companies: Could your personal assets be at risk?" Davis reveals that LLCs do not always guarantee members full protection from personal liabilities. She explains that courts have the ability to "pierce the corporate veil," a process she defines as the "concept of holding an individual liable for the acts of a corporation." She goes on to demonstrate how a number of state courts have ruled that LLC members can be held accountable for the businesses debts in certain situations involving fraud and misrepresentation.
  
  Due to the constantly evolving nature of law and the ability of state and federal courts to pierce the veils of LLCs, the protection provided to members is subject to legal interpretation and will vary by jurisdiction.