An LLC is not a partnership. (A limited liability partnership is an LLP.) An LLC is a distinct business structure with some similarities to a corporation, some to a partnership, and some unique features.
He's referring to the fact that, by default, the United States taxes LLCs having more than one member as a partnership. An interest in a partnership is taxed differently than an interest in a corporation (stock).
> Specifically, a domestic LLC with at least two members is classified as a partnership for federal income tax purposes unless [...etc...]
(To grandparent comment: for what it's worth, I too find it highly confusing that "partnership" and "LLP" (vs LLC) are both terms and not as closely related as one might first suspect...)
> for what it's worth, I too find it highly confusing that "partnership" and "LLP" (vs LLC) are both terms and not as closely related as one might first suspect...
They are just as closely related as one might suspect: an LLP is a partnership where the partners enjoy limited liability.
An LLC is not a partnership, though multimember LLCs are, by default, treated like a partnership for federal income tax purposes.
(The LLC is a fairly new form of business entity originally created as a lower overhead alternative to the corporation that would provide a distinct entity for corporate joint ventures; the LLP is also fairly new, but [in its US form] it was formed to protect innocent members of professional firms from personal liability for actions of other members of the firms, and is in many jurisdictions restricted to professional firms.)
Owners of LLCs and LLPs generally have "limited liability" with respect to their equity investment, meaning that they are only liable for the entity's debts to the extent of their investment.
The primary difference between an LLC and an LLP: an LLC must have at least one "general partner" who is fully liable for all of the LLP's debts in the event the LLP defaults.
Another major difference: until recently, law firms and accounting firms could be LLPs but not LLCs, due to malpractice liability concerns. Now that most bar associations and/or states require these firms to maintain malpractice insurance, many states allow law firms and accounting firms to be LLCs.
LLCs are partnerships for tax purposes in the US (unless they have only a single owner, in which case they are disregarded), hybrid entities for legal purposes in the US however many owners they have, and are either corporations or partnerships outside the US depending on the country. Most countries treat LLCs as corporate-type entities regardless of the number of owners, and only a handful will treat an LLC as a disregarded entity if it has a single owner.
Nope, still more complicated than that. Single member LLCs are not partnerships by default. Multimember LLCs are partnerships by default. Either group can choose to be a yet a different category. See citation and quote in https://news.ycombinator.com/item?id=16961968 .
You're right, I left out that single member LLCs are disregarded entities because I wasn't trying to be comprehensive. I've updated the comment with more detail.
An LLC is not a partnership. (A limited liability partnership is an LLP.) An LLC is a distinct business structure with some similarities to a corporation, some to a partnership, and some unique features.