What is an LLC?
An LLC, Limited Liability Company, is a type of business entity. It combines pass-through taxation of a sole-proprietorship or partnership with the limited liability of a corporation. LLCs are not corporations under state law and are typically more flexible and well suited for companies with single owners.
How does an LLC benefit me?
LLCs provide exactly what the name suggests: limited liability upon its owner or owners. This means that the owner is not personally responsible for any debts incurred by the business and most business-related lawsuits. This means that lawsuits filed against the company cannot collect from personal assets such as bank accounts, personal vehicles or homes. They are limited to collecting assets from the LLC.
LLCs also prevent double taxation. An LLC’s profits go directly to its owners and would be reported on their individual tax returns. This is known as pass-through taxation.
This differs from other types of business entities, like a C Corp for example, because a C Corp’s profits are taxed before being distributed to its owners and then again when the owners report their profits on their individual tax returns. There are 3 different ways an LLC can pay income tax. Contact an attorney for more information.
LLCs are also simpler to own and operate than corporations as it isn’t required to designate officers and directors, conduct shareholder meetings, or keep records of minutes and resolutions. There is no minimum or a maximum number of owners, also known as members, that an LLC can have. Many LLCs have only one owner, but they can have hundreds if so desired.
LLCs can be managed by members or non-members and have the option of designating managers to run the day-to-day operations.
How do I form an LLC?
Starting an LLC is a relatively simple process, however having an attorney’s guidance can be helpful because of complex legal issues, including tax considerations, that can arise with any business. To start an LLC, you must file an Articles of Organization with the state in which you plan the LLC to be organized. Please contact one of our attorneys for more information on drafting an Articles of Organization and what information is necessary. Once the Articles of Organization is filed, the state will review it and then will need to officially approve the LLC before the company can legally conduct business.
For assistance with setting up a Limited Liability Company and to find out about our small business start-up legal plans, click here to schedule a free consultation with Attorney Charles Rick.