A Limited Liability Company (LLC), refers to the “personal liability of a corporation with the pass-through taxation of a sole proprietorship partnership” and it is the most popular business structure in the US.
So why is this information necessary to the person just starting up a relatively new small business, without any prior knowledge of any of the business lingo? To the person who has everything vested in making the business a success?
At a glance, deciding to form an LLC comes across as the most sensible business decision. One should think of an LLC as a silent partner, a person vested in the business as well as the wellbeing of the company and personal assets. If the intention is to act within the best interest of a business, then the right business decision is to consider forming an LLC, as the main purpose is to provide the business owner with peace of mind. LLC’s are all about structuring the business, to ensure that the assets of the business, as well as the owner, is protected, in the event of the business being sued. This is a US-specific business structure taking into account that there is a specific liability protection corporation. Understanding and knowing which business structure is most suited for the business will be the most crucial decision any business owner will make. Unlike other business structures, LLC’s have the option of choosing amongst three different ways of paying income tax: Sales tax, Franchise tax as well as Unemployment tax, and Income Withholding tax. Forming and maintaining an LLC is a relatively easy task and the main benefit is that one does not end up paying double tax.
Where do you start setting up an LLC?
The process of forming an LLC is rather easy, and can be broken down into a six-step process:
- Select your state:
- Name you LLC:
- Choose a registered agent:
- File the articles of organization:
- Create an operating agreement:
- Get an EIN:
For those who find the creativity side of the business a bit more daunting, at least there is a flip side, as there are platforms that can assist a business with the choosing of a naming convention for LLC’s. What makes this convention even more amazing is that it is relatively straightforward and comes at no extra costs.
How do I decide on which LLC is best suited to me and my business?
There are four options of LLC to choose from, each of which has its benefits.
- Domestic LLC – is applicable for when business is conducted within the state in which the LLC was formed.
- Foreign LLC – is applicable for when the business owner decides to expand the business to a new state, in such instances the business will then need to register in that state for a foreign LLC.
- Professional LLC – are applicable when a business plans to perform a professional service. Therefore certain members from this LLC need to have the necessary state license to account for their professional qualifications. Forming a Professional LLC can be rather tricky, therefore it is advised that one consults with legal counsel first, also noting that the limit of personal liability is not extended to professional malpractice claims.
- Series LLC – this is the most unique form of an LLC out of all the other LLC’s. The liability extends from a single “parent” across to all “child” businesses. Protecting from liabilities all of the other business under a single series. Note that this service is currently only offered in Alabama, Delaware, Washington D.C., Illinois, Indiana, Iowa, Kansas, Minnesota, Missouri, Montana, Nevada, North Dakota, Oklahoma, Tennessee, Texas, Utah, and Wisconsin.
Based on the information provided it is evident that the formation provides security and peace of mind for any business owner. Ready to take the next step, well access the information here.