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Why You Should Form an LLC Today (Insider Secrets)

Why You Should Form an LLC Today (Insider Secrets)

If you work as a sole proprietor, you will find a number of good reasons to form a limited liability company, also known as an LLC. You can find out more about why you should form an LLC today by reading the following content.

Once you find out more about the benefits of forming an LLC, you will want to contact me to discuss forming an LLC for your business. This type of business entity is a great way for a start-up or sole proprietor to increase his or her credibility or influence. 

 

Why You Should Form an LLC Today and Not Wait!

Limited liability companies make it possible for you to do business and do it with more freedom. That is why you should form an LLC today, and not waste another minute. Once you learn the inside secrets of forming this company, you will want to email me for further details. I can help you form an LLC and direct you in the process. Send me an email now at sam@mollaeilaw.com.

Whether you have been doing business as a sole proprietor or are just beginning a business, you need to review the advantages of forming an LLC. While some business owners believe that an LLC formation is too time-consuming or costly, they soon find out that is not the case. 

 

The Primary Advantages

When you compare the benefits of forming an LLC, as opposed to forming a partnership, working as a sole proprietor or forming a corporation, you will like the results associated with creating an LLC. Some of the main advantages are listed below.

Your Liability Is Limited

Just as the name suggests, you don’t have to worry as much about getting sued. Members or owners of an LLC are protected from the acts of the other members of the LLC. When you form an LLC, a creditor cannot go after your personal assets, including your home, bank accounts, or similar financial holdings. 

The debts of the business belong to the business. Therefore, creditors cannot use your personal holdings to cover business defaults. If you work as a sole proprietor or conduct business as a partnership, you can be held personally liable for business debts and obligations.

Membership Is Flexible

While you have limited liability, your membership is flexible. The members of an LLC may be partners, individuals, corporations, or trusts. You can also have as many members as you want.

If you incorporate and form an S corporation, you are much more restricted in the number of members you can appoint or who you can list as shareholders. (An S corporation is an entity that is considered a pass-through tax entity under IRS Subchapter S.)

Easier Management Practices

Members of an LLC can manage the LLC or have a management group take care of operations. Corporations, on the other hand, can only be managed by their Board of Directors. Shareholders cannot take on the responsibility.

Pass-through Taxation

You do not have to pay taxes at the business entity level if you set your business up as an LLC. Therefore, any business loss or income is passed through to the owners who report the results on their personal tax returns. Tax that is due is paid at an individual rather than a business level. 

Corporations that elect not to be taxed as an S corporation, or which are set up as C corporations, are taxed at the business entity level. Shareholders of C corporations must also pay taxes on distributed income from shares.

Added Credibility

Forming an LLC helps a new business establish credibility – more so than working as a sole proprietor or in a partnership.

Limited Requirements for Compliance

An LLC faces fewer requirements for compliance than any other business entity. 

 

You Will Know Why You Should Form an LLC when You Check Out the Steps

You will know why you should form an LLC when you see how easy it is to set up this type of entity. I can direct you through the eight steps needed to establish your business as an LLC. Simply email me at sam@mollaeilaw.com after you read the following outline.

 

#1 Select a State to Form Your LLC

You can select any state to form your LLC, even if you are not doing business in that state. Some states offer more advantages for LLCs than others. Therefore, it is a good idea to read their requirements. In most cases, however, start-ups or new businesses choose to form an LLC where their business is located. Otherwise, they frequently choose Delaware to form an LLC if they want to form an LLC outside of California.

Why Californians may Choose Delaware to Form an LLC

LLCs are often formed in Delaware for the following reasons:

  • The business law in the state is extremely flexible.
  • No personal income tax is charged for non-residents.

Why Nevada May be Chosen

Another non-resident option may be Nevada, which offers the following:

  • No personal income tax is imposed for LLCs
  • A franchise tax is not paid by LLCs

How to Make a Choice if You Wish to Form an LLC Outside of California

To weigh the pros and cons of establishing your LLC outside of California or within the state, review the following:

  • Consider how LLCs are taxed or the taxation requirements for foreign businesses.
  • Does the state impose an income tax on LLCs?
  • Does the state impose a franchise tax or minimum tax?
  • Calculate your business’s projected earnings for the first couple of years and assess states in terms of the actual amount of taxes paid. 

If you choose to form an LLC in Delaware, Nevada, or another US state outside of California, you typically need to foreign qualify your state in the outside venue. For any questions about forming an LLC outside and within California, talk to me via email. Address your questions to sam@mollaeilaw.com right now. I can help you decide how to proceed with this type of business formation.

 

#2 Choose a Name for Your LLC

To form an LLC, you will need to select a name that is not currently listed on the Secretary of State’s records. If you are a sole proprietor, you may already do business under a registered DBA or “doing business as name,” which you may be able to use as your LLC legal name.

To select an LLC name, perform a name search on the formation state’s website to see if the name is available. Reserve the name for a short period if you are not yet prepared to file an LLC formation document.

You should also perform a trademark search of the business LLC name, especially if you want to prevent any problems with intellectual property infringements or customer confusion.

 

#3 Select a Registered Agent

To form an LLC, you will need to obtain a registered agent – someone who receives or processes important tax or legal paperwork on behalf of the LLC. 

What Registered Agents Receive

Some of the paperwork includes the following:

  • Documents or notices sent by the Secretary of State’s office, such as annual reports
  • Tax documents
  • Notice of lawsuit documents
  • Subpoenas
  • Garnishment orders

Why You Should Choose Someone Other than Yourself to Serve as Registered Agent

While you can name yourself as the registered agent, it is better to name another party. If you are not available to receive time-sensitive documents, you can get into trouble legally. For further details on appointing a registered agent, send me an email at sam@mollaeilaw.com  today.

 

#4 Prepare an Operating Agreement for Your LLC

An operating agreement must be drafted for every state in the US by owners of LLCs. While this agreement can be oral, it is highly advised that the agreement is in writing. This agreement indicates how the LLC will be operated and managed. 

Even if you are the only member in an LLC, drafting an operating agreement shows that you wish to comply to the LLC’s rules, or recognize its separate existence.

By putting the operating agreement in writing, an owner or owners of an LLC can easily spell out what will happen in certain circumstances during the course of business.

It is particularly important that a multi-member LLC follows an operating agreement. Owners can use the form to review the division of labor, profits, and ownership of the business. By having these rules in writing and in force, any disputes will be diffused between the owners.

 

#5 File the LLC with the State

To make the LLC official, you must file certain LLC formation documents with the Secretary of State’s office. I can help you with this part of the formation, and assist you with gathering the paperwork and filing it. Contact me at sam@mollaeilaw.com for further details.

 

#6 Obtain an EIN

After you establish a business entity, you need to obtain an employee identification number or EIN from the IRS. You can use this number on our business bank accounts and employment and income tax returns. You also need to apply for a sales tax ID number before registering with the labor department in your state.

 

#7 Open a Bank Account for Your Business

While this step is not required in forming an LLC, it is a key practice to follow with respect to formation. When forming an LLC, a business bank account will help you separate your personal expenses and taxes from those of your business. Signing up for an account will allow you to start transacting business.

 

#8 Register to Do Business, if Required

If your LLC does business in more than the formation state, you need to register or foreign qualify your LLC in each “foreign” state. To do so, you need to do the following:

  • File an application for authority with the Secretary of State’s office
  • Draft a Certificate of Good Standing
  • Appoint and name a registered agent

Factors to Consider for Being Foreign-qualified

Many legal factors are considered when determining a company’s presence in a state before it is foreign-qualified. These factors include:

  • An LLC’s physical presence
  • The number of orders an LLC accepts in the state
  • Whether or not the LLC has employees in a state

To find out more about getting foreign-qualified, you will need my help. Email me at sam@mollaeilaw.com  with your questions today.

 

Learn Why You Should Form an LLC Today to Meet Your State’s Legal Requirements

To learn why you should form an LLC today, you need to speak to a qualified attorney. That way, you can gain a competitive advantage in business. In fact, you should select an attorney and accountant to back you in your legal and financial dealings. Doing so will enable you to enjoy a higher professional standing. 

 

What To Do Next

Forming an LLC is important, as it safeguards your personal assets from your company’s liabilities and debts. You also enjoy pass-through taxation and greater credibility with vendors, business partners, and customers. Shoot me an email now at sam@mollaeilaw.com. I can help you form an LLC as well as advise you on obtaining the needed tax identification number, business license, and permit.

Sam Mollaei, Esq.

As a Business Lawyer for Entrepreneurs, I help entrepreneurs start their U.S. business without dealing with complicated government forms. I’ve assisted more than 2,246 entrepreneurs successfully start their business and I'm backed by more than 702 5-Star Google Reviews. If you're interested in starting your business, take the first step by requesting your Free Strategy Session on this page.

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