Create an LLC: Top 5 Factors to Consider
Forming an LLC (Limited Liability Company) can be a big step for many business owners, particularly in Los Angeles2 min read
Forming an LLC (Limited Liability Company) can be a big step for many business owners, particularly in Los Angeles. If you are looking for counsel that understand local regulation, you’re in luck. UpCounsel's team of experienced lawyers provide quality, cost-efficient legal services that can help secure your company’s longevity and success. Here are the top 5 factors to consider when forming an LLC:
First, consider whether or not to form a single-member LLC or a multi-member LLC. A sole proprietorship is the most common form of business, usually owned by one individual. By contrast, a multi-member LLC has two or more owners, who can manage the company together. Each member of the LLC can be responsible for running the company, while also taking income out as profits.
Second, determine your personal financial liability. When an LLC is properly formed, its members (owners) have personal liability protection from the debts and obligations of the business. This means that the LLC gets burned, not you personally. It’s important to choose a lawyer who is knowledgeable about local regulations and can help ensure that your LLC is properly formed.
Third, decide the cost and complexity. Most LLCs provide unparalleled taxation advantages and benefits, but an LLC also has annual obligations such as filing separate tax returns and maintaining corporate formalities that can be quite costly. Talk to a lawyer about the risks of forming an LLC and the amount of complexity it will require.
Fourth, choose a management structure. Selecting a management structure for your LLC will set the tone for its fiscal success. An operating agreement should be created – or in the alternative, a partnership agreement if there is more than one member – that sets out who is responsible for the day-to-day operations of the business.
Lastly, name your LLC. Every LLC requires a proper name that shouldn’t be too similar to another business. This is important because having the same or similar name could result in liability issues, not to mention confusion on behalf of your customers.
Forming an LLC can be a complex and costly enterprise, but with the help of a competent lawyer you can ensure that you are on the right track. With each of these factors in consideration, you’ll be well-positioned to create a business entity that is both legally compliant and fruitful.