A Limited Liability Company (LLC) is a business under US law with the following characteristics:
- Establishes a "corporate veil" of limited liability, such that creditors or lawsuits can only go after the company's assets, and not personal assets of the owner(s).
- Requires much less in the way of formalities than a corporation.
- Treated as a flow-through entity by default, meaning that the income of the company is treated directly as the income of the owner(s), rather than being held by the company and paid out as salary or dividends. (Not all LLCs operate as flow-through entities, but this question is only about those that do.)
At first glance, it appears that the first and third points above are in conflict with one another: if all revenue generated by the company flows directly to the owner(s) rather than being retained by the company itself, then the company has no money of its own with which to purchase company assets!
Obviously this has to be an overly simplistic understanding, but I'm having trouble finding a plain-English description of how it really works. So my question is, what are the principles by which a flow-through LLC segregates company money and assets from flow-through payments to the owner(s)?