What is a Domestic Limited Liability Company

    by Benjamin Aronson
Updated May 29, 2024

If you’re an entrepreneur, there’s a good chance you’ve heard of the term “domestic limited liability company” (or “DLLC”). But what is it, exactly? And what does it mean for your business?

In this post, we’ll break down everything you need to know about DLLCs.

Domestic Limited Liability Company (LLC)

Each state has different laws and regulations. This is due to the fact that each state has its own rights and is granted the authority to establish laws and regulate them as required.

Although laws may vary, when it comes down to classifying an LLC, there are two main categories:

A foreign LLC isn’t a company that was established or operating in another country. It’s actually an entity that is simply operating outside of your registered home state.

For example, if you originally established your LLC in Texas and then expand business operations into Wyoming and hired a company like LegalZoom to file your LLC in Wyoming, that would be considered a foreign LLC.

A domestic LLC on the other hand, is an LLC that is registered and operating in your home state.

What is the meaning of a Domestic Limited Liability Company?

A domestic LLC is a business structure that is established in accordance with laws of your home state, That is the meaning behind a DLLC.

This entity  provides personal asset protection and limited liability for its owners (members). As an owner of the company, you enjoy protection from personal responsibility (up to a degree) and debt.

This means, that should the LLC become involved in debt or other legal obligations, your personal property is protected. You are only liable for your financial contribution to the company.

What is a Domestic Entity?

A domestic entity is a company or organization that has been formed in accordance with the laws of its home country.

A domestic entity can be either an LLC or a Corporation.  A DLLC works in the same manner as any other LLC would. You can add or remove members at your discretion and partake in management of the company if you so choose.

The only difference with a DLLC is that it’s established and operated within your home state.

What is an LLC used for?

LLCs provide personal asset protection and limited liability for its owners.

A limited liability company is the ideal structure for small businesses, groups of individuals or family-owned enterprises. It is also a great way to shield your assets in case your business becomes involved in debt or other legal obligation.

An LLC can be used to organize your business in a way that offers top protection.

When should I use an LLC?

If you are looking for privacy, wish to limit the potential liability of business debts or simply want to organize your business in a way that offers you the most legal protection, an LLC is the way to go.

LLCs are becoming very popular because they are easy to set up and have simple tax filing requirements.

What does LLC Stand for?

An LLC is the short-form for Limited Liability Company. The meaning behind this term is that the members are no personally liable for company’s debts.

A limited liability company is a hybrid business struct between a corporation and a partnership.

What are the benefits of an LLC?

Let’s take a look at a few of the benefits of an LLC:

  • Provides personal asset protection and limited liability for its owners.
  • Avoids the double taxation that is common with corporations. In most states, an LLC does not pay income taxes, only the individual members will be taxed.
  • Unlike a Corporation, an LLC is not required to hold regular meetings and record minutes. This makes it an inexpensive and easy way to start a business.

What are the disadvantages of an LLC?

A quick overview of the disadvantages of an LLC are:

  • Filings and required fees will vary by state, which can get expensive
  • The transfer of ownership is often challenging, more challenging than that of transferring a corporation

LLC Classification

LLC classification refers to the way the business can be taxed. There are four main LLC tax classifications that a business owner can choose from:

  1. Disregarded entity (single member)
  2. Partnership (multimember)
  3. C-Corp
  4. S-Corp
Tax Classification Advantages Disadvantages
1. Disregarded entity ·         Easy formation

·         Pass through taxation

·         All funds that flow through business are taxed
2. Partnership ·         Easy formation

·         Pass through taxation

·         Not ideal for “passive owners”
3. C-Corp ·         Ideal for investors ·         Double taxation
4. S-Corp ·         Offers tax benefits

·         Pass through taxation

·         Not ideal for “passive owners”

For more information on tax classification, reach out to a small business accountant.

Different types of LLC

There are several types of LLCs. The most common type is a single member, also known as a disregarded entity.

We’re going to go over a few different types of LLCs, how they compare and if they’re relevant to you.

Professional LLC vs LLC

A professional LLC is an entity that provides professional services. Professional services include lawyers, accountants and consultants. The main difference between a professional LLCs and other types of business structures is that there are very strict guidelines for maintaining your status as a professional company.

An LLC on the other hand is more generic and can be used for any type of business.

Domestic LLC vs Foreign LLC

A domestic LLC is a business formed in accordance with the laws of your home state. This means that you have registered and filed with your Secretary of State, usually through a company like Zenbusiness or any other formation service.

A foreign LLC on the other hand, is set up through a different state than your home state.  Therefore, you will have to register your business with the Secretary of State of the state where you are doing business.


A DLLC stands for Domestic Limited Liability Company. As mentioned above, a Domestic entity is a term used to describe an business that was formed in accordance with the laws of your home state.

A Limited Liability Company, on the other hand, is a more generic term and can be set up in any state (is less classified).

Final Thoughts on Domestic LLCs

A Domestic Limited Liability Company (DLLC) is defined as a business entity that is formed under the laws of the state in which it operates. In other words, it is an entity created by state statute that provides limited liability to its owners.

This type of company offers several advantages and can be an attractive option for small business owners starting out. If you’re thinking of starting a business, it’s important to understand the different types of entities available to you and weigh the pros and cons of each.


  1. (IRS) LLC
  2. (CCIM) Entity Classification Made Simple