A more thorough explanation:

A Limited Liability Company (LLC) is a type of business organization that combines elements of partnerships and corporations. It offers flexibility in terms of ownership, management, and taxation.

An LLC can have multiple members who each own an equal share of the business and have equal control over its operations. Alternatively, some members can have more control and profit allocations than others. The LLC can choose to be taxed like a partnership or a corporation.

One of the main advantages of an LLC is that its members have limited personal liability for the business's debts and obligations. This means that their personal assets are protected in case the business faces financial difficulties.

To form an LLC, the business must register with the state and create a certificate of organization. The structure and management of the LLC are typically outlined in an operating agreement. Compared to corporations, LLCs have fewer guidelines and procedures for investors to follow.

However, courts may "pierce the corporate veil" and hold individual members personally liable if the LLC is found to be operating as an extension of an investor rather than a separate entity. This is more likely to happen if the LLC is used to defraud creditors or if there is only one investor.

John and Jane want to start a small business selling handmade crafts. They decide to form an LLC so that they can share ownership and management responsibilities. They create a certificate of organization and an operating agreement that outlines their roles and responsibilities.

As the business grows, they decide to bring on a third member, Sarah, who invests money but does not want to be involved in the day-to-day operations. They amend their operating agreement to reflect Sarah's investment and her limited role in the business.

A few years later, the business faces financial difficulties and is unable to pay its debts. Because they formed an LLC, John, Jane, and Sarah's personal assets are protected, and they are not personally liable for the business's debts.

This example illustrates how an LLC can offer flexibility in ownership and management while also providing personal liability protection for its members.