Archive for the ‘LLC Formation’ Category

LLC formation: How to form an LLC in different US states

A limited liability company is a business structure that is very similar to that of a corporation. The difference between these two is that the liabilities of a limited company are much less than that of a corporation. In the United States, limited liability companies are new ways to help small business owners and employees gain the major benefits by owning corporations. A limited company does not have shareholders and they are not required to meet at shareholders meetings. The following are some of the common steps to form an LLC in different US states:

Choosing a proper name for your LLC
To form an LLC in any of the US states, the first thing to be done is to choose the name of your LLC and be sure that it complies with the rules of the particular state’s LLC division. The name has to be different than any other LLCs filed and also must end with an LLC designator. Until you file the articles of organization, you can reserve a name for your LLC for a limited period of time.

Need to file articles of organization
The LLC filing office demands the articles of organization from your company once you are done with the name of your organization. There are some basic documents that are required to file the articles of organization also known as the certificate of formation or certificate of incorporation.

Filing fees while submitting articles of organization
To submit the articles of organization, you are required to pay a filing fee. This can be considered one of the small disadvantages of forming an LLC compared to a partnership business or a sole proprietorship. The minimum fee that is charged by most of the states in the United States is around $100.

Required Registered Agent
A registered agent is very important for forming an LLC in the United States. The name and address of this person, usually a member of your LLC, has to be registered under state laws in the LLC filing office who will act as an ‘agent for service of process’ for any future lawsuit involving your LLC.

LLC operating agreement
The state laws demand that an LLC operating agreement must be prepared embodying the rules for the ownership and operation of the business. This is not filed with the LLC filing office.

License and Permits for an LLC
The license and permits are the last but most important step in forming an LLC in the United States. This generally includes the business license, tax registration certificate, a seller’s permit, a federal employer identification number and a zoning permit.

LLC Formation Services

To form an LLC or a limited liability company, the prerequisites are preparing articles of incorporation, operating agreement, bylaws, tax exemption files etc. There are various service providers that offer these services and prepare necessary documents for you that are able to deal with the local and state laws.

An LLC includes laws that protect you and the members of your organization with limited liability protection, lessen your risk of tax audits. Some of these service providers’ fees for completing documents for your LLC can range between $99 and $399.

Unlimited name search opportunities
While forming an LLC, you need to remember that the name you choose for your organization needs to be a unique one. This should be searched beforehand through the secretary of state filing office. Most of the service providers give you the opportunity to search for the desired name for your organization. The unlimited search option enables you to find the perfect name for your organization. The numerous online service providers have made things easier for you to do.

Legal Advice
To start your LLC you need to understand some of the requirements of your local and state laws under which you are forming your business. The preparation of documents such as articles of organization and operating agreement need to include details of your business and also sets up rules for your organization. These experienced service providers usually supply technically sound advice to help you in preparing all important documents required by your organization. Attorneys provided by notable service providers will assess your overall business plans and will also make sure that the legal structure takes into account your present circumstances and financial situation.

Electronic copies of LLC official formation document and EIN obtainment
The LLC formation service providers also allow you to get the electronic copies of all the legal documents prepared by them. This is included with the charges for their preparation services. These documents are generally emailed to the customer within a single business day.

In addition to this, the LLC formation service providers also get your federal Employer Identification Number (EIN) within a single business day after the formation of your limited liability company. This number identifies you as the sole owner of the organization and gives you certain facilities provided by the federal laws.

Tax information
The online service providers can supply you with required tax information for incorporating your limited liability company, tax exempt information and also tax saving advice, rules and policies of the local and state government.

The pros and cons of forming an LLC

As the name suggests, an LLC is a limited liability company and those companies forming under the umbrella of this type of organization are afforded limited liability. This company design helps to keep the personal liability of a business owner separate from the business. It is a new business concept in the United States that offers the benefits of a corporation while eliminating some of the complications. Existing business owners sometimes wish to change the way they conduct business and thus switch to forming an LLC for business.

The pros of forming an LLC
Before opening an LLC or converting your existing business to an LLC, you must look for the benefits that you would be getting as well as the extra costs involved. The benefits are to be calculated on the basis of the present economic condition and not forecasts. It is advisable to consult an attorney to calculate the tax and look into the legalities of forming the LLC. It is also advisable to hire a certified public accountant for counseling on the financial benefits of forming an LLC.

Forming an LLC also assures that the business can avoid double taxation such as sometimes happens with corporations. A corporation is taxed and according to that, the corporation must also file taxes. In corporations, the individual members of the corporation are taxed on what they earned. As a result of this, members of the corporation can wind up paying double taxes while the LLC has to pay only once.
There is no restriction for the organizational structure of an LLC. Forming an LLC also helps a new business in establishing creditability with potential employees, customers, partners and vendors.

The cons of forming an LLC
The primary con of forming an LLC is the expense involved in forming the organization. To form the LLC, the articles of organization must be filed under the state government rules and regulations along with the filing fees in accordance with state laws. Sometimes LLCs have to pay annual report or franchise tax fees. Thus the cost of forming an LLC can be more than a partnership, sole proprietor or entrepreneurship.
The other disadvantage of forming an LLC is that it is difficult to transfer ownership. Since an LLC is a new business category, there are few case laws or legal precedents, unlike corporations. The record keeping requirements after the formation of an LLC is also a bit more stringent compared to that of a corporation.