LLCs: Important Facts For Small Business Owners

A Limited Liability Company or LLC is a company structure that is easy to maintain. That’s why it’s a common choice for small business owners.

If you want to establish your own LLC, make sure you have all the facts in hand. In business, it’s always a good idea to seal the deal only after you’ve done thorough research.

Here is a quick overview of LLCs to help you stay informed:

  • LLC has a mix of features of Partnerships and Corporations. So, you can call it a hybrid company structure.
  • Owners in an LLC are called “members.”
  • An LLC can have an unlimited number of members.
  • Individuals, LLCs, or Corporations can be members of an LLC.
  • One of the main features is limited liability. This means that LLC members are not liable to personally clear off the debts of the LLC.
  • Trust companies, banks, and insurance companies can’t be members of LLCs.
  • Each LLC member pays taxes based on the percentage of ownership in the LLC. Additionally, they are also required to pay self-employment taxes.
  • For LLCs that only have a single member, the income of the business is passed on the individual’s tax returns.
  • You need to provide your federal-level filing along with state-level filing for LLCs.
  • The state filing fees have to be paid every year from the time of the formation of the LLC.
  • You’re not required to maintain any records of meetings or any resolutions for LLCs.
  • If you want to go public, an LLC isn’t the right choice for you. Instead, it’s more apt to form a Corporation.

A Step-by-Step Guide to Forming Your Own LLC

Ready to take the final plunge?

Here are all the steps you need to take to form your own LLC:

Step 1: Apply for an LLC Employer Identification Number (EIN).

Step 2: Start filing the Articles of Organization.

Step 3: Prepare an Operating Agreement. It should clearly define all the financial details as well as the functional framework for your LLC.

Step 4: Pay the filing fees.

It’s possible to do the entire procedure directly through the IRS and Secretary of State, yet it can be complex and take a long time. Alternatively, you can use a professional filing service to do the work for you.

For more information related to LLCs, check out the infographic below by GovDocFiling.

The Essentials Facts of LLCs You Need to Know as a Small Business Owner

Image Courtesy: GovDocFiling

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