Quick LLC Formation: Everything You Need to Know
Implementing a quick LLC formation can happen if you are diligent. There are a few steps you will need to complete in order to transform your business into an LLC.3 min read
Quick LLC Formation
Implementing a quick LLC formation can happen if you are diligent. There are a few steps you will need to complete in order to transform your business into an LLC.
What is a Limited Liability Company?
If you want to shield your personal finances like a corporation while enjoying a low-maintenance formation, an LLC is the way to go. An LLC is a form of business that is regulated by your state. They are popular due to their similarities to corporations without the complexities. The owners are provided limited liability for the debt and management of the LLC.
Additional features of LLCs are more akin to partnerships, which are easy to manage and have pass-through taxation.
LLCs can be single-member or multiple-member businesses. LLC owners may avoid being double-taxed like a corporation because all profits and other tax items can be passed through to the member’s own personal income tax returns.
With these advantages, it is easy to see why LLCs have become so popular as a form of business. An LLC combines the most beneficial components of a partnership or sole proprietorships with a corporation.
Most states only require a simple form that converts your business to an LLC, typically referred to as a certificate of conversion. Those states that do not offer a conversion form will need to file articles of organization to form an LLC.
In many states, the LLC must publish a notice in their local newspaper stating that the partnership is terminated before converting to an LLC.
You will have to transfer all your identification numbers, permits and licenses to your new LLC, which include:
- Federal employer identification number
- State employer identification number
- Permit for sales tax
- Business license
- Additional permits or licenses
You do not need to go to the expense of using a lawyer to form your LLC. There is no law requiring you to do so. You can prepare all of the required paperwork if you feel comfortable doing it yourself.
Every state requires that the LLC have at least one person as a member. Single-member LLCs will be in a specific category. You can choose to be treated as a sole proprietor, a corporation, or as a disregarded entity.
Much like partners in partnerships, the owner of the LLC is referred to as a member. The LLC members will select the managers to manage the business. This is similar to directors in a corporation. The manager of an LLC can be a member just like the director of a corporation can be a shareholder.
Much like sole proprietors and partnerships, LLCs are not viewed as a separate structure from the owners with regard to taxes. The LLC itself does not pay taxes. The owners of the LLC will pay taxes on the money they have earned with the LLC on their personal tax returns.
How to Form an LLC
You can create an LLC by going through your Secretary of State’s office in the state where you want to operate your business. There are typically three ways you can file and create your LLC: through the website of your Secretary of State, visiting the office, or by mailing the forms.
The first step is filing the articles of organization with your state. Before you do so, you need to make sure that your business name is available. You may not form an LLC with the same name as a business already in operation in your state.
You can typically do a business name search online, but some states do not offer this service. You could check by phone or submit a request in writing.
You will also need to name a registered agent, which is a person or other entity that provides an address to the state and has agreed to accept any correspondence or lawsuits on behalf of the LLC.
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