Setting up a limited liability company (LLC) is the best business structure for most small businesses because they are inexpensive, easy to form and simple to maintain. They have tax options that benefit your bottom line.
Creating an LLC is an excellent way for business owners to limit their liability for business debts. Here is a step-by-step guide to forming an LLC.
The initial paperwork and fees for an LLC are relatively light, although there is a wide variation in what states charge in fees and taxes.
The process is simple enough for owners to handle without special knowledge, although it is a good idea to consult an attorney or accountant for assistance.
Ongoing requirements are usually annual. Anyone starting a business, or currently running it as a sole proprietor, should consider forming an LLC.
This is especially true if you are concerned about limiting your personal legal liability as much as possible. The main difference between professional LLCs and regular LLCs is that all members of a professional LLC must have a professional license.
You can check your state's LLC naming requirements and find out if the name you want is available by visiting the website of the state agency responsible for business filings. LLCs can be member-managed, i.e.
All owners share responsibility for the day-to-day operation of the company.
You may have to file an annual report updating information regarding your LLC and pay an annual filing fee.
There are two considerations here, the first is to choose a name that does not duplicate that of an existing LLC in your state. For a fee, many states allow filers to reserve an LLC name for a certain period of time before filing articles of organization.
The name of this document may be slightly different from state to state, but it is the basic document that establishes your LLC.
These members can continue to do business, of course; they will just have to start a new LLC from scratch. They are usually taxed as sole proprietorships or partnerships, but SMLLCs and multi-member LLCs have the option to elect to be taxed as a partnership.
Although many small businesses are limited liability companies (LLCs), some founders may not really need the protections of an LLC.
This is probably the most complicated part of setting up an LLC, but the good news is that the document is not necessarily required to be filed with the state. Members can manage an LLC, which allows all owners to share in the day-to-day decision making of the company.
LLCs are popular because they offer the same limited liability as a corporation, but are easier and cheaper to form and manage.