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The challenge of forming a “limited liability company” (LLC) may seem time consuming, costly and confusing. You dread the forms and red tape. Incorporating your business is important though – it protects your personal assets, ensures you comply with certain laws, and the business structure you choose could reduce your tax liabilities. Size doesn’t matter. LLC formation is vital in getting legal and tax protection for you as its owner.
“But how do I form my LLC without getting bogged down in mountains of forms and paperwork,” you ask?
Great question. The answer: MaxFilings’ 3-step LLC incorporation service.
How to form a limited liability corporation (LLC)
Forming an LLC may differ depending on which state you wish to incorporate in. In general, though, the standard process typically looks something like this:
Step 1: Choose a business name
The name must be available and comply with the LLC rules specified by your state.
Step 2: Choose a location
Pick a state in which to incorporate your LLC. Determining a location for your business can depend on many factors – including state taxes, laws, customer base and the location of business owners.
Step 3: Submit the paperwork
Draft and file your Articles of Organization with the Secretary of State’s office and pay the filing fee (ranging from $100 to $800 depending on your state).
Step 4: Create LLC operating agreement
This document spells out who will run your business (managers or members), how many owners are in the business and what their rights and responsibilities will be.
Step 5: Publish your formation
In only a few states (Arizona, Nebraska and New York), you are required to announce your intent to form an LLC in a local newspaper or publication. If you aren’t forming an LLC in these states, you can skip this one.
Step 6: Obtain licenses and certificates
Apply for a business license, local permits and industry certificates if needed.
Step 7: Apply for IDs
Fill out Form SS-4 or apply online with the Internal Revenue Service (IRS) to get your Employer Identification Number (EIN). Also apply for any other necessary ID numbers required by your local and state governments for things like disability, unemployment and other payroll taxes.
And voilá, you’ve formed an LLC! With MaxFilings, it’s that simple.
The Articles of Incorporation preparation and filing is completely handled by MaxFilings’ LLC formation specialists who have years of experience starting limited liability companies in all 50 states and D.C. Our LLC formation specialists will also obtain your federal tax ID and perform a name check. We offer rush processing, if needed.
How do I know if an LLC is right for my business?
Another great question. The answer: it depends. First, you’ll need to consider the size of your business and assets. Start with these yes/no questions:
- Do you have employees other than yourself?
- Do you operate at an office or work space?
- Do you have substantial income?
- Do you have high value personal assets?
If you answered YES to any of the questions above, you should definitely consider forming an LLC for your business. Here’s why:
Protection
Protection of LLC partners’ personal assets is one of the major advantages of a limited partnership.
Liability
Limited partners are not financially responsible for the debts, obligations and liabilities of the partnership.
Time
Hate meetings? Unlike corporations, LLCs are not required to hold annual meetings or document minutes.
Simplicity
With LLCs, there is less paperwork and limited partnerships are easier to manage than most corporations.
Capital
Raising additional capital is typically much easier with LLCs due to the limited liability of limited partners.
Taxes
Limited partnerships are not themselves taxed so partners can enjoy pass-through taxation as with other partnerships.
Though sometimes referred to as limited liability corporations, LLCs are very different from corporations; however, they do provide the same limited liability protection. If you are looking for the same limited liability as a corporation but without the formal structure and time-consuming ongoing requirements, an LLC’s flexibility and simplicity offer a distinct advantage over a corporation.
MaxFilings can help you do so quickly, easily and economically. Don’t delay…
Start Your LLC Formation TodayMillions of small businesses are registered in the US each year, and every owner has to make the same important decision:
Which business entity type is right for me?
For the answer to that question, check out our complete guide to choosing the best business entity for incorporation.
Incorporating as a limited liability company is one option. Here at MaxFilings, we regularly get questions about what an LLC is and if it’s the best choice for all businesses.
Continue reading to see answers to the most commonly asked questions about this popular business entity type.
1. What is a limited liability company (LLC)?
A Limited Liability Company (LLC) is a distinct business structure that combines a partnership’s flexibility with a corporation’s liability protection.
It’s established by filing Articles of Organization with the relevant state authority. While not mandatory, an operating agreement is pivotal as it delineates the members’ rights, responsibilities, ownership percentages, voting protocols, and profit-sharing mechanisms. This agreement can be tailored irrespective of the members’ capital contributions.
Articles of Organization vs. Articles of Incorporation
Question: Are the Articles of Organization the same as the Articles of Incorporation?
Answer: No, they are not the same. While both documents serve a similar purpose of officially registering a business entity with the state, they apply to different types of business structures.
- Articles of Organization: This document establishes a Limited Liability Company (LLC). It typically outlines the basic operational structures of the LLC, such as its name, purpose, initial members, and registered agent.
- Articles of Incorporation: This document is used to form a corporation, whether a C corporation or an S corporation. It generally includes details like the corporation’s name, purpose, number of shares it’s authorized to issue, and the names of initial directors.
While both documents are foundational in setting up a business entity, the Articles of Organization are for LLCs, and the Articles of Incorporation are for corporations.
LLCs offer “limited liability” to their members, akin to the protection shareholders receive in corporations. This means members are shielded from personal liability for the company’s debts or legal judgments.
Typically, their financial risk is confined to their investment in the LLC.
However, this protection isn’t absolute; members can be held accountable if the LLC engages in fraudulent activities or causes intentional harm.
Taxation for LLCs is versatile. They can opt for corporate taxation or embrace the pass-through tax structure akin to an S corporation. This flexibility and fewer regulatory requirements than traditional corporations make LLCs a preferred choice for many entrepreneurs and small businesses.
2. How is an LLC structured?
An LLC is owned by its members, whose rights and responsibilities are typically outlined in an operating agreement.
Unlike corporate shareholders, an LLC member’s stake, voting rights, and profit shares aren’t strictly tied to their capital investment. Management can be vested in one or more designated managers, ensuring efficient decision-making and operations, especially when some members prefer a hands-off approach.
3. What are the advantages of incorporating as an LLC?
LLCs offer a plethora of benefits:
- Flexibility: Operating agreements can be tailored to suit the unique needs of its members.
- Legal distinction: An LLC is recognized as a separate legal entity from its members and managers.
- Broad scope: LLCs can engage in virtually any lawful business activity.
- Membership versatility: Single-member LLCs are permissible, and there’s no cap on the number of members. Even corporations, trusts, and partnerships can be LLC members.
- Employee attraction: Many professionals prefer working for LLCs over sole proprietorships or partnerships due to perceived stability and growth potential.
- Transferability: Most jurisdictions allow easy transfer of interests in LLCs.
- Reduced red tape: LLCs face fewer bureaucratic hurdles and paperwork than corporations.
- Asset protection: Members enjoy limited liability, safeguarding their personal assets from business-related debts.
- Tax choices: LLCs can opt for corporate taxation or the pass-through structure of an S corporation.
- Diverse membership classes: Members can be segmented into various classes, each with distinct rights and benefits.
4. Potential drawbacks of LLCs
While LLCs offer numerous advantages, they come with certain challenges:
- Initial setup: Articles of Organization must be filed with the state, incurring associated fees.
- Documentation: LLCs demand more administrative paperwork than sole proprietorships or partnerships.
5. Do I need a business attorney to form an LLC?
Not necessarily. While forming an LLC involves a series of procedural steps, hiring an attorney isn’t obligatory.
At MaxFilings, we offer comprehensive LLC formation services at a fraction of typical legal fees.
However, consulting a local legal expert is advisable for intricate situations or state-specific nuances. Additionally, consulting a tax professional is recommended, given the tax implications of LLCs.
6. Membership in LLCs
Most states sanction single-member LLCs. Notably, there’s no restriction on the maximum number of members an LLC can have.
7. Management dynamics of an LLC
LLCs can adopt a member-managed or manager-managed structure, depending on the members’ preferences and the nature of the business.
8. The role of a registered agent
Every LLC must appoint a registered agent —a state-registered professional responsible for receiving legal documents on the company’s behalf. While anyone can serve in this capacity, many businesses opt for specialized registered agents to ensure timely and efficient handling of crucial paperwork.
9. What constitutes an LLC kit?
An LLC Kit is a comprehensive package designed to assist LLCs in adhering to state regulations and maintaining proper records.
It typically includes tools for periodic meetings, membership certificates, and an official seal for authenticating documents.
10. What is a Federal Employer Identification Number (EIN)?
Every LLC must secure an EIN—a unique identifier for tax purposes. This number is essential for various business transactions, including opening bank accounts. MaxFilings can assist in preparing the requisite IRS Form SS-4 for your EIN.
11. Naming your LLC
Your chosen business name must be distinctive and not in use by another entity in your state. Additionally, it should be free from patent conflicts. All LLC names must include the “LLC” designation or an approved variant to signify its business structure.
Not ready to start forming your LLC yet?
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