Do you know the Steps to Forming an LLC?
By odihost on February 16th, 2012
Deciding to form a Limited Liability Company (LLC) has many benefits. It guards your business venture from unexpected situations such as lawsuits. In addition, it enables you to avoid double taxation problems that corporations have. Find out more about this business structure and determine whether or not forming an LLC is best for you.
What is a Limited Liability Company?
A Limited Liability Company is a business structure that combines features of a sole proprietorship, a partnership, and a corporation. Members of this structure go by the name of members and never shareholders or partners. This arrangement fits small and medium-sized businesses. They will receive the great things about corporations without having to sacrifice their small business structure.
LLCs are different from corporations in that there aren’t any shareholders; for that reason, this organization doesn’t need regular shareholder meetings for major company decisions. LLCs also don’t need their own set of bylaws. There are many states that need operating agreements, but most don’t.
What are the benefits of being an LLC?
Owners of an LLC could decide whether or not they want to be taxed as a sole proprietorship or as a corporation. Corporations have lower taxes, but this is because the IRS taxes both of them on the corporate and the personal level. A sole proprietorship has higher taxes, but you can pick whether the IRS treats you as an individual or as a corporate entity. The IRS treats most LLCs as a sole proprietorship, taxing members and needing only an information return from the company.
Opting to form a Limited Liability Company also permits you to avoid personal liability just as a corporation does. Personal liability can easily lead to bankruptcy, especially when you’ve got a pending lawsuit. In a limited liability company, the company’s assets are separate from your personal assets. The government only holds your company responsible for any mishaps or shortcomings.
This organization structure also provides you more control on your business. Shareholders have to agree on a decision just before applying any changes in a corporation. LLCs, on the other hand, merely need a managing member to manage business decisions and management.
How do you form an LLC?
The first step to forming an LLC is to figure out where you desire to register your company. Each state has its own regulations regarding LLC formation and registration. Next, you should choose a unique name that complies with your state’s rules. Your name shouldn’t violate another industry’s trademark. It must end with any of the three designators – LLC, L.L.C., and Ltd. Liability Co. Some states also do not allow specific words, such as Bank, Insurance, or City. Check your state legislation before selecting a name.
The next step is to look for an LLC registered agent. This agent will be your company’s representative in the state. Your agent would be the government’s contact person if they need to have anything from your company. Together with your agent, you will file articles of organization and other disclosure requirements. Some states will be more strict with the information they require. Texas requires a list of the LLC’s members along with regular disclosure documents. Delaware, in contrast, is known for asking the least information. As soon as your requirements are complete, you just have to pay necessary fees and you’re all set.
Source: http://www.articlesbase.com/finance-articles/do-you-know-the-steps-to-forming-an-llc-5661841.html
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