Forming an LLC

Forming an LLC

When starting a business, one of the first and most important decisions is how the business will be structured. There are several types of business structures, but many business owners tend to gravitate toward the Limited Liability Company (LLC) structure, and with good reason. Structuring a business as an LLC offers legal separation between the business owners or partners and the business itself. With an LLC, all contracts, invoices, income and liability falls on the company, rather than the business owners, and LLCs also offer more tax flexibility than other structures. If you've decided that forming an LLC is right for your business, there are some steps you'll need to take to get things underway. Although setting up an LLC can be a relatively simple process, consulting an attorney who understands the steps needed to properly structure your business is always recommended. As always, knowing which questions to ask can help make the process go more smoothly!

When starting a business, one of the first and most important decisions is how the business will be structured…

There are several types of business structures, but many business owners tend to gravitate toward the Limited Liability Company (LLC) structure, and with good reason. Structuring a business as an LLC offers legal separation between the business owners or partners and the business itself. With an LLC, all contracts, invoices, income and liability falls on the company, rather than the business owners, and LLCs also offer more tax flexibility than other structures. If you've decided that forming an LLC is right for your business, there are some steps you'll need to take to get things underway. Although setting up an LLC can be a relatively simple process, consulting an attorney who understands the steps needed to properly structure your business is always recommended. As always, knowing which questions to ask can help make the process go more smoothly!

How will an LLC protect me and/or any partners from liability?

One of the big advantages of an LLC is that business owners and any partners are generally protected from personal liability related to anything the business does. Do some online research or talk to an attorney about how an LLC can protect you and your partners from business-related liability. 

Do I need to hire a lawyer in order to form an LLC?

While many businesses prefer to use an attorney when setting up an LLC, the paperwork can also be done independently, if desired. Many states allow you to file for an LLC quickly and easily online or through the mail, and the process is relatively simple. If you plan to file Articles of Organization, however, an attorney should be hired to ensure everything is done correctly. 

Are there restrictions on what I can name my LLC?

Generally speaking, you can name your LLC whatever you want, assuming the name is not taken or trademarked. Most states require the use of "LLC" or some variation as part of the business name, however, in order to distinguish your business as a limited liability company. Do some research online or talk to an attorney to find out what the laws are specific to your state. 

What are the tax benefits of forming an LLC?

When choosing to structure your business as an LLC, the various tax benefits should not be ignored. Talk to your accountant or do some research online to learn more about the tax benefits of having an LLC. Keep in mind that an LLC does not pay taxes directly. Instead, the owners of the LLC pay the taxes individually, and there is never a crossover of taxes on both a personal and business level, as there is with Corporations. 

How much does does forming an LLC cost?

Depending on what state you live in, fees will vary for filing the documents and Articles of Organization/Certificate of Organization. In most states, the fees are between $50 and $200, excluding attorney fees. Do some research online to find out what the cost is in your state, or talk to your attorney to get an idea of how much forming an LLC will cost you. 

Do I need to file Articles of Organization?

Articles of Organization are the legal documents required to establish your business as an LLC. Since Articles of Organization can be complex in some cases, an attorney may be useful in making sure everything is filled out and filed properly. 

Does an LLC require an operating agreement?

Regardless of how many members the LLC will have, an operating agreement must be filed to define the separation between the member(s) and the business, describe the operations of the business, clarify succession order and adhere to the rules of the state the business is operating in. Consider talking to an attorney about the details of your partnership/operating agreement in order to make sure nothing is missed or goes unchecked. The operating agreement is one of the most important documents in the LLC process.