All About LLC: Everything You Need to Know
Want to know all about LLC formation? Forming an LLC, whether on your own or with professional assistance, is not terribly difficult to do. It is an ideal way to start an official business that you can grow into a profitable venture.3 min read
Want to know all about LLC formation? Forming an LLC, whether on your own or with professional assistance, is not terribly difficult to do. It is an ideal way to start an official business that you can grow into a profitable venture.
What Is a Limited Liability Company (LLC)?
A LLC, or limited liability company, is a way to form a business that is legally recognized in all states in the U.S. The point of starting an LLC for your business is to unite the kinship between sole proprietorships and corporations. Both allow the business owner to act as a business while still being able to file a rather simple tax return. An LLC also has similar benefits to a corporation when it comes to protecting the owner’s personal liability.
For tax purposes, you can opt to treat the LLC as a partnership or a corporation based on what is necessary for your business. Once you form an LLC for your business, it will then be its own special entity. It will have its own debt and deal with all legal issues independently of the owner.
Unlike a corporation, an LLC is still connected to your own personal taxes. It is the easiest to form of all legal businesses. LLCs are not as structured as a corporation, so you have some flexibility.
Business Structure and Management for Your LLC
Those who own an LLC are referred to as “members,” much like corporations refer to its owners as “partners.” The two are similar in nature with a few variances:
· A single person or groups of people can own an LLC
· LLCs are less formal in their structure and management
· An LLC is managed with a vested interest for all the members
· The owners of the LLC are in charge of all facets of the business
· Unlike a corporation, there are no separate positions within an LLC. Corporations have directors, shareholders and officers
· A member of an LLC holds the same type of power as the three main roles of a corporation. However, LLC members can distinguish themselves as holding different roles as they see fit
· Ownership within an LLC is largely divided into percentages instead of shares typically seen in corporations
· A different business entity may also be a member of a different LLC
What Is the Difference Between an LLC and a Corporation?
There can be some confusion about LLCs and corporations. They are often mistaken for the same entity. An LLC is not a corporation at all. Corporations and LLCs have totally different make ups when it comes to how they operate.
LLCs are less complex to form than corporations. There are no by-laws to contend with, nor is there a need for a corporate charter. However, an LLC is just as important as a corporation in the eyes of the law. Both must be carefully operated in the eyes of the law to ensure all the financial components are separate from your personal finances.
Types of LLCs
There are different types of LLCs that you can form:
· Foreign LLCs: an LLC that is not one that is formed internationally. It refers to an LLC that operates in a state different from where it was formed. For instance, you can form a LLC in Louisiana but operate it in Texas
· Member-Managed LLCs: all owners operate the business equally
· Manager-Managed LLC: some members can sit back while others operate the business. Members and non-members may manage the business
· Single-Member LLC: an LLC with one member
· Multiple-Member: LLC with more than one member. It is important to be careful of the operation rights of all members in the event there is a change in ownership
· Series LLC: acts as an overseer of other LLCs and their individual operations. It is currently only an option in eight other states
· Restricted LLC: a type of LLC launched in 2009 that is only available in Nevada. They opt to remain restricted within their operation and do not make any payments to members until 10 years after formation
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