You may be wondering how and why should I start a LLC (Limited Liability Company). In this blog, I will breakdown the basics about a LLC.
What is a Limited Liability Company or an LLC?
An LLC is a business structure that is allowed and regulated by the state it is registered and doing business in. Each state has its own set of statutes and regulations for the LLC’s registered in its state. The LLC can be a Corporation, Partnership, Sole proprietorship or Non-profit.
Corporation: a business entity that is governed by a board.
Partnership: two or more parties that have ownership of the business.
Sole Proprietorship: business owned and managed by one party.
Non-profit: Business started to benefit the public or a social cause.
An LLC protects the business owners assets by separating personal liability from the liability of the business. In other words if the business is sued the only assets subject to the suit are the assets owned by the business and not the owner’s personal assets. An LLC also limits personal liability in the event your business would need to file for bankruptcy.
Terms used by the LLC structure:
Members: Owners of the LLC, this can be an individual or another LLC or Corporation.
Articles of Organizations: Legal documentation detailing how your business is organized and the duties and responsibility of its members. ( ie: Owner, manager, CEO, ETC…)
Principal: Person that will act on behalf of the LLC in legal and/or tax matters.
Statutory Agent: Person assigned to accept legal service for the business.
Benefits of having an LLC:
- Protects the owner or owners assets from legal liability
- Provides flexibility on how the business is managed. This can be member/owner managed or manager-managed (managed by someone other than the owner or owners).
- Is relatively inexpensive when compared to the benefits.
- Is possible to DIY
Disadvantages of having an LLC
There are really no disadvantages to having an LLC. Disadvantages may occur due to the structure chosen for the LLC and these disadvantages would be in taxation. It is wise to consult an accountant or tax professional before you choose a structure.
How to register for an LLC:
Each state has its own process and requirements to register an LLC. What is common for all states is that you can choose to register for an LLC on your own or you can hire a legal service to do so for you for an additional fee.
If you have chosen to register the LLC on your own, you would search the internet for how to file in LLC in your state. Once you determine what agency handles LLC for your state go to their website, search LLC and follow the instructions they provide.
It is wise to know how you would like to have the LLC structured especially for tax purposes. Always consult your accountant or a tax consultant if you have tax questions.
What should I have ready before I register my LLC?
- A Business Name (You want to make sure the name is available and not taken by another business)
- A Business Email
- The structure of your business (Who are the members or owners, who will be the principal and who will be the statutory agent)
- Preferred and/or the available tax structure for your type of business.
- The funds to pay for the registration fees and the legal service if you choose to hire one.
Options available for obtaining your LLC:
Do it yourself DIY : This option is available if you would like to save the money you would pay for a service, however this option will require your time and understanding of the process in your state.
Hire an Online Service: Many online services provide options to the file LLC’s.This option has an additional cost but saves time.
Hire a local legal service: Search for law firms or legal services in your area that offer LLC formation and/or business solutions. This option provides one on one service and also additional support during the process. Having a local legal service also provides you with a go to for your future business legal needs.
Should I DIY my LLC or should I hire a legal service?
The answer is like many if not most legal questions and this it depends. The answer depends on what has more value to you at the moment. Do you have the time to invest in following through the process and the possible additional time that may be required to correct any errors or issues that may arise by not understanding the process or do you have the money to hire a service to handle it for you in the fastest and most efficient way possible.
Melissa Medina is a certified legal document preparer and independent paralegal with 17 years of experience in the field. She has been helping communities in the valley through legal issues in family law, personal injury, estate planning and more since 2020.
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