What defines an LLC (Limited Liability Company)?

A Limited Liability Company (LLC) is primarily defined by its unique structure that combines aspects of both partnerships and corporations, providing liability protection to its owners, who are known as members. One fundamental characteristic of an LLC is that it is governed by specific state laws, such as the Texas Limited Liability Company Act. This legislation outlines the requirements for formation, operation, and governance of LLCs in Texas, ensuring that businesses can take advantage of limited liability protection while also enjoying the flexibility of management that an LLC offers.

In this context, the significance of the governing act cannot be understated since it plays a crucial role in determining the rights and responsibilities of the members, the formation processes, and other regulatory aspects that inform how the LLC operates. This framework is what distinguishes LLCs from other types of business entities, making option B the defining characteristic of an LLC.