LLC Information & FAQs
What is a Limited Liability Company?
A Limited Liability Company (LLC) is similar to a corporation in that it is a legal entity that can conduct business under itís own name. When operated and maintained properly the owners (members) of the LLC can not be held personally liable for itís debts and liabilities. This means that the members personal assets are protected and they will not be required to settle any company debt or court judgments against the LLC with their own money.
Pass Through Tax Advantage
The advantage of forming as an LLC is that it combines the personal liability protection of a corporation with the pass through taxation of a sole proprietorship or partnership. A limited liability companyís income or loss is passed directly to the members and is reported on their personal tax returns.
Simplicity of Organization & Operation
LLCs require relatively few organizational and administrative formalities when compared to corporations. They do not have to hold annual meetings and are allowed to set up the business structure as the members see fit.
No Restrictions on Ownership
There are no restrictions on who can own interest in an LLC. They can be owned by individuals, corporations, partnerships or other entities. Further, there is no requirement that an owner be a US citizen.
What paperwork is involved in forming an LLC?
Limited Liability Companies are formed by filing Articles of Organization or Certificate of Formation with the state and paying the required state fees. After it is formed the members of the LLC should create and adopt an operating agreement.
How long does forming an LLC take?
This depends on many factors including which state, current filing volume and what type of service you request. Standard filings generally take about 3 to 5 weeks to be filed in most states. You can speed up the filing process by utilizing the states expedited filing procedures.
What are the name requirements?
It is important to pick a unique name for your company. The standard applied by the state is that your name can not be deceptively similar to an existing companyís name. Further, you will be required to use an indicator at the end of the name such as Limited Liability Company or LLC. (i.e. My Unique Name, LLC)
What is a member of an LLC?
A member is a person or entity that owns a percentage of interest in the LLC. Members of an LLC are similar to shareholders of a corporation.
How many members can an LLC have?
An LLC can have one member or it can have many members.
How is an LLC treated for tax purposes?
LLCs are treated similar to sole proprietorships and partnerships for tax purposes. A single member LLC will report income loss on their personal tax return by filing IRS Form 1040 & Schedule C. An LLC with more than one member will prepare a partnership return and file IRS Form 1065. The members will given a Schedule K-1 in order to report income or loss from the business on their personal return.
How is an LLC structured?
The members can set up the structure of an LLC as they see fit. The members can manage the day to day operations of the company or they can select a manager run the business. The manager can be a member of the LLC or a person or company outside of the LLC.
What is an operating agreement?
An operating agreement is agreement between the members of an LLC that spells out how the LLC will conduct itís business. It outlines such things as privileges of membership, management structure and handling of distributions. Learn More About Operating Agreements
What is an EIN?
The IRS requires business entities to obtain an Employee Identification Number. The EIN is commonly known as your companies tax ID #. The EIN will be required in order to open bank and credit accounts, hire employees or set up benefit plans. Your company will use itís tax id # much like you use your Social Security Number.
What is a Registered Agent?
A registered agent is a person or entity responsible for accepting official legal and tax correspondence on your companyís behalf. You can act as you own agent as long as you have a physical address in the state your corporation is formed in and are available during normal business hours.
Does my state require me to publish notice after my LLC is formed?
There are a few states that do require notice to be published in a local newspaper after an entity has been formed. Arizona, Georgia, Nebraska and Pennsylvania require publication for both corporations and LLCs. New York requires only LLCs to publish notice. In New York the fees vary greatly based on location of the business.
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