If you are running a business and feel it’s time to form an LLC, you probably have plenty of questions. It can seem a very daunting task. We have spoken with experts to bring you a few tips regarding the formation of an LLC. Below are the most important facts about LLCs that you should definitely be aware of.
What Is An LLC?
Firstly, we should discuss what an LLC actually is. LLC stands for Limited Liability Company. This is a type of business formation that is different from a partnership, corporation, or sole proprietorship company. A ZenBusiness guide to forming your own LLC can tell you more information about the finer details of LLCs.
There are varying rules in different states regarding the ownership of LLCs, but in general, anyone can own one, and an owner or partner in an LLC is generally called a member. Limited liability companies are a sort of hybrid as they combine features of sole proprietorship companies with features of corporate businesses.
Benefits of LLCs
The main benefit of forming a limited liability company as opposed to another form of business is in the name – it’s limited liability. By forming an LLC for your business you are no longer held financially responsible for the business. This means if your business falls into debt or faces liability payments they cannot be taken from you.
In a sole proprietorship, if this situation arises, you may find yourself having to sell or mortgage your home to finance such business issues. Another benefit is the avoidance of so-called “double taxation”.
When operating outside of an LLC, your business will have to pay tax as well as you paying your own taxes. With limited liability companies, you will only have to pay tax on the money you draw from the business. This is a real time-saver and will help you keep more of your hard-earned cash.
How To Start an LLC
So, now you know the benefits of limited liability companies, you’re probably wondering how to form one yourself. Firstly, it’s important to understand that the rules and requirements surrounding the formation and running of LLCs do vary from state to state. Before you move forward it is best to make sure you read and understand your state’s rules and regulations. Once you know these details there are a few more simple steps to follow.
Once you have a name for your LLC – which should be different from any other company in your state’s name – you can appoint a registered agent to help you move forward.
This is a requirement as they deal with the state’s paperwork, and will help you file your certificate of formation. The next step is to create an operating agreement for your LLC. This helps to legitimize your business and also sets out the ways you intend to operate.
Finally, you will need an EIN (Employee Identification Number). This helps you register for business bank accounts, loans, and more.
Follow these simple steps to form your own limited liability company today. The process really is quite easy, and the benefits are huge. Good luck in your new business!