One of the most popular business entities for small businesses to form today is the LLC. LLC stands for limited liability company. While there of various types of LLCs, they all share some common features, such limited liability and pass-through taxation.
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Book a Call So You Can Easily Set Up Your LLC
If you would like to set up an LLC for your business, you can do so easily by contacting me and my legal team. Book a call to speak to us here: https://mollaeilaw.com.
We can help you decide on what type of LLC is best for your business.
Keep in mind that an LLC is formed according to the state laws where an LLC is established. Therefore, you should carefully review the LLC rules for the state where you wish to set up your business.
The information below elaborates further on LLC types and how they work.
Types of LLCs and Their Features
The following listing defines the various types of LLCs and their unique features.
Single Member LLCs
A single member LLC is so-called because it has one owner. It is similar to a sole proprietorship, as the owner is responsible for the debts of the business, taxes, and business transactions.
If a single-member LLC does not incorporate, it is classified by the IRS as a disregarded entity.
Therefore, a single member LLC is taxed as a sole proprietorship. LLCs may also be set up to be taxed as a corporation. The single-member LLC is the least expensive LLC formation to file, thereby making it a popular choice for a small business.
Unlike a sole proprietorship, the owner of a single-member LLC enjoys personal asset protection.
Partnering to Form an LLC
General partnerships often set themselves up as LLCs to enjoy LLC benefits. Therefore, it is important to go over the two main types of partnerships to see how they differ managerially.
If an LLC features more than one member, it may be set up as a general partnership. All the owners under this format are responsible for the business’s taxes, debts, and transactions. A limited partnership and general partnership are similar, as more than one person assumes the responsibilities.
In a limited partnership, one of the members manages operations while assuming unlimited personal liability for debts. The other member does not manage the business but does have limited liability.
The limited partner assumes a passive role as an investor.
Again, partnerships are mentioned in this article, as a multiple member LLC usually takes on the structure of a general partnership when it is formed. Therefore, all the partners equally assume responsibility for the transactions, debts, and taxes of the LLC.
If the business sells its assets, the members or partners can also decide on how they will pay taxes on their allocation of their income share.
As a recap, a general partnership and limited partnership are alike in that multiple people share in the obligations and tasks. However, when a limited partnership is formed, one member takes on the total liabilities for the business while the other partner assumes limited liability for obligations.
That is the one important difference to remember about general and limited partnerships – how the responsibilities and obligations are managed.
Types of LLCs that are Member-Managed and Manager-Managed
Types of LLCs, such as member-managed and manager-managed LLCs, distinguish who manages the company. While all the members in a member-managed LLC make decisions for the company, a manager appointee is given this responsibility in a manager-managed LLC.
The above information gives you a lot of details to digest. Therefor e, you need to contact me and my team for help in setting up an LLC.
Book a call to speak to us here: https://mollaeilaw.com.
As you can see, you can get creative when forming an LLC, at least when it comes to the management and the allocation of funds. To enjoy this type of flexibility, you need to know the basic steps in forming an LLC.
Types of LLCs: How the Entity is Established
While there are several types of LLCs, they all are all basically set up the same way.
The Wall Street Journal provides some helpful guidelines for establishing an LLC.
- The publication defines an LLC as a company that is similar to a partnership but enjoys personal asset protection like a corporation.
- The WSJ goes on to state that an LLC does not have to follow the formalities of incorporation.
- Also, the Rules for LLC formations vary from state to state.
File Articles of Organization
All businesses that wish to form an LLC today must also file articles of organization with the Secretary of State’s office where they are set up. The “articles” are not as complicated as they sound, as the paperwork usually is a short form that asks for the name of the LLC and a list of the members with their contact details.
Is Your Business Name Unique?
State filing fees range from about $30 to $200. You will need to consult with a lawyer to make sure you comply with all the registration requirements for the state where you set up your business.
Before you submit an LLC business name, you need to make sure it has not been taken. Check on the Secretary of State’s database of names to make sure the name for your LLC is unique.
Retain the Services of a Registered Agent
You also want to obtain the services of registered agent to accept any documentation during set-up of your LLC. You will need the services of a registered agent after you form your company as well.
Also referred to as a statutory agent, the registered agent is a person or business that agrees to accept official documents on behalf of the LLC business during regular business hours.
Individuals who live in the state where the LLC is formed, and who are at least 18 years old, generally can assume the role of registered agent.
Why an Operating Agreement Is Important?
While it frequently is not a legal requirement, you should draft an operating agreement for your LLC. An operating agreement can help your business avoid internal disputes with respect to organization, ownership percentages, and the roles and responsibilities of LLC members.
An operating agreement can also provide lawsuit protection. Any judicial decision can be more easily made when you already have an operating agreement in place.
Without the agreement, the decision made by a court will default to the LLC operating rules established by the state.
Why You Need a Lawyer
While you don’t necessarily have to retain legal services to establish an LLC, you can get into legal trouble if you don’t have legal representation.
A lawyer can protect your business interests during the formation of your LLC as well as afterwards. You can also turn to a lawyer for legal decision-making and contract review.
Contact me today to schedule a consultation. Email firstname.lastname@example.org for ensure your business’s future financially and professionally.
While most states do not require that you submit annual paperwork, you should still record business decisions, and hold a formal meeting annually. Doing so will safeguard your business status and the reputation of your LLC.
I can help you comply with LLC laws and protect your LLC. You can consult with me anytime or book an appointment online. Email email@example.com for further details today.
The Main Benefits
Some states charge annual taxes for LLC formations. These costs can offset some of the LLC benefits. The major LLC benefits are defined below.
- Pass through taxation allows you pass the profits and losses of your business to your individual tax return or to member tax returns. Doing so can result in a tax savings, as LLC profits are not taxed at a business or personal level.
- LLC owners are not personally liable for their company’s debts and liabilities.
To give you an idea of the expenses you may incur, California, for example, charges an annual tax fee, as of this writing, of $800, and imposes an annual fee of approximately $900 to $11,800, based on a business’s annual income of $250,000 or more.
Establishing the Hub for Your LLC
Other states charge less in fees and taxes, particularly the states of Wyoming, Nevada, and Delaware. However, when you set up an LLC, it is usually best to establish your LLC where your business is known locally.
If you do not have a brick-and-mortar location where you conduct business, you might think of setting up an LLC in a state where the fees are less prohibitive.
I can help you decide where to set up your LLC if you have initiated a business plan. Contact me by email for further information. Email firstname.lastname@example.org to schedule and appointment.
Making Everything Official
After your LLC is established, you will receive a certificate to show your LLC is official. Upon receipt of the certificate, you need to obtain an employer identification number (EIN) so you can set up a business bank account. You will also need to secure the proper licenses.
If you plan to conduct business in more than one state, you will need to submit paperwork, or register to perform businesses in the other locales.
The documents you need to fill out will be similar to what you filled out to form your LLC. You will also need to hire a registered agent in the states where you plan to do business.
What To Do Next
As you can see, the various types of LLCs that can be formed enables you to enjoy more flexibility as a business owner and entrepreneur.
While an LLC is fairly simple to set up, you still need to fill out the paperwork correctly and have it reviewed by a lawyer. You will also need legal counsel to draft an operating agreement so you can define members’ roles and rights.
I can support your initiatives when you begin your business. Give me a call or email me so you can get your business established in compliance with the laws where you plan to operate.
Email email@example.com for legal assistance and guidance now.
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