1. What Is Incorporation?
2. LLC Formation
3. What Are Members?

Finding out is an LLC incorporated is important for a business to know. If a corporate entity is used to structure the business, the relevant statues must be adhered to in the state the entity is desired to be created in. A majority of jurisdictions make it mandatory to file the articles of incorporation first when a corporation is forming.

What Is Incorporation?

The document should include the following:

  • Name of the company
  • Business address
  • What the reason for the corporation is
  • What powers they have
  • Name and address of any person helping to incorporate the business
  • How many shares there are
  • Type of stock that will be issued

A business will evolve from a general partnership or sole proprietorship when it's incorporated and form a company that's recognized formally by the state it's incorporated in. A new company structure usually falls into the category of a corporation or a limited liability company. A company becomes its own business structure that's legal to distinguish it from the people who founded it. The company's owners will then create a different legal entity through incorporation to transact business.

LLC Formation

Each state has the authority to allow LLCs to be created. Many jurisdictions have the same requirements to create an LLC. The organizer will create a certificate of organization and then deliver this to their state office. At the very least, the certificate must have the name of the business, business address, and name and address of the authorized agent. Many states won't file this certificate until there's a minimum of one member who joins the LLC.

If the certificate is delivered when there aren't any existing members, the state will give the company 90 days to let them know when a member joins. When 90 days are up, the certificate will not be valid anymore.

What Are Members?

Most jurisdictions don't set restrictions on who can become a member of the LLC. Members already in the LLC can create an operating agreement and write the tailor membership requirements how they'd like. That said, if there isn't an operating agreement, it's required by the state for all of the members to give unanimous consent in order for a new member to be admitted.

Once a member gets voted into the LLC, they can participate in all management activities and make a legal claim on part of the LLC assets and earnings. Potential owners of a corporation don't tend to need everyone to approve before buying stock.

Tax Rules

Any business that has the LLC structure doesn't need to incorporate in order to get taxed like a corporation. The IRS, or Internal Revenue Service, lets LLCs choose what corporate tax treatment they want by filling out Form 8832. When the election happens, the LLC and the members are required to stick to the corporate tax rules for a minimum of 60 months before another election can happen. Corporations are in charge of all tax payments and filings.

If they don't comply with the tax regulations, this doesn't affect the shareholder liability. If corporate tax treatment isn't chosen, the federal tax law will automatically assign single-member LLCs as sole proprietorships, while multi-member LLCs will be partnerships.

Advantages of an LLC

There are many advantages to an LLC. There are no limits on how many owners can be in an LLC. The profits and losses get passed through to the owners' personal tax returns. There aren't any requirements for minute books or annual meetings. Business owners are protected in an LLC and are not held liable for the LLC's actions. Owners of the LLC are protected in case a lawsuit is brought against the business, and their personal assets are safeguarded.

There is also flexibility when it comes to management. There's a set management structure in corporations where directors look over all the large business decisions. Officers are in charge of the daily activities of the business. This is different from LLCs, which give members or managers the authority to make these decisions. An LLC can be member-managed or manager-managed depending on which structure they decide is best for the company.

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