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.