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.

Forms LLC

To form an LLC or a limited liability company, the most important thing is to file proper documents under the local and state laws. To do this, you may need to consult an experienced attorney or can go through the legal website of your states LLC filing office to find the necessary details to file the forms. The forms needed for the LLC are the articles of organization, operating agreement, registration of statutory agent of the corporation, income tax reports. An easy way to get these documents prepared is to fill out the forms available for each section from the websites of your states LLC filing office.

Forms of Article of Organization
The Articles of Organization are one of the most important documents required to form an LLC. The Articles of Organization are legal documents that include details like the legal name of your organization, the registered office address, the names and contact numbers of the board members, stocks held by the company, and the price for each stock. These are general basic forms that provide pertinent information about your organization.

Certificate of Incorporation
The certificate of incorporation form is available on the legal websites of the LLC filing office of your state. Some of the required details are the legal name of the corporation, registered office address, the name and contact numbers of the members of the board of the organization, and the total amount of assets managed by the corporation. This certificate of incorporation gives your limited liability company a legal business identity.

Tax filing forms
The limited liability companies must complete the tax filing forms at regular intervals. The tax schedules of the state and federal governments vary depending on whether it is an LLC, corporation or partnership. These forms can be completed at quarterly and annual intervals.

Action of Incorporator
Action of Incorporator is an important form to be filled in by the owners of an LLC. This usually helps to form the bylaws of organizations and may be prepared by the directors and members of the board. The bylaws generally include details of name of the corporation, the name and contact details of the members of the organization, amendments of the corporation, and the executive board. The Action of Incorporator also enables the organization to run its business smoothly and successfully without any major legal issues.

LLC Formation in the Economic Downturn

The economic downturn has been an obstacle for most individuals. However, some have used it as an opportunity to rethink their business options and form new alliances. In the drive to reboot their economies, various state governments (in conjunction with the federal government) offer a host of incentives to create new businesses and sustainable employment. One of these initiatives is the promotion of the formation of LLCs.

Government Support
The US stimulus packages have trumpeted an era of low interest rates. The Federal Reserve has reduced interest rates to almost 0% with favorable payment mechanism to reduce stress on the investors. The aim of this is to boost investment and give consumers an impression that the economy is turning around. One way they give this impression is offer business start-up loans to people who will open LLCs.

Choosing to form LLC\s
LLCs provide a great framework for any entrepreneur to operate in these troubled times. The LLCs provide limited liability protection from any debt, legal activity or other obligations that the organization may incur. This framework is critical now more than ever due to the uncertainties in the market place. Many states also offer additional incentives to LLC owners such as the ability to:

• Have unlimited number of members in the LLC to boost financing
• Register a LLC even if you operate outside of the state
• Source financial support from government agencies
• Acquire relaxed penalties from the IRS
• Access 24hr online and call in services to give advice to investors
• Have unlimited life to the LLC even if a member should resign or die

Ease of Documentation
To make it as easy as possible for entrepreneurs to incorporate their LLC, state boards have opened up several avenues that process these application. These include outpost offices, independent contractors, the internet and more accommodating offices.