How to start an LLC

LLC summary

Many entrepreneurs are excited to get their business started. They have a great idea and are ready to share their skills and knowledge with the world and to benefit themselves and other through their hard work and determination. There are many things to be excited about. There are also many things that have to be planned. What to sell? Who to sell it to? How to get the most out of the business? There are many different concerns that must be addressed when starting any business. And one of the most important questions is: "What type of business should I start?"

A Limited Liability Company, often known as an LLC, has become a very popular method of setting up a business for new budding entrepreneurs. LLC's are popular for many different reasons which include asset protection and less corporate red tape and bureaucracy than corporations. You have many options as far as tax benefits are concerned and you can create a hybrid form of business giving you the benefits of a corporation and those of a partnership without as much of the hassle of both. There are many advantages to using an LLC and starting your business as one.

Advantages and disadvantages of forming a Limited Liability Company

Whenever starting any type of business there are many different things to consider, from the market conditions to the suppliers used, from the partners chosen to the type of business structure used. Here are some advantages and disadvantages of an LLC. You must take your individual concerns and expectations into consideration when starting an LLC or any other type of business. Starting a business is a very real thing and should be taken very seriously. Doing it on a whim may be bad and lead to problems bigger then ever thought possible if done incorrectly. No one wants to spend time and money starting a business that cannot succeed because improper organization. Here are some advantages and disadvantages to consider when deciding what type of business is right for you.

The name of an LLC comes from the purpose it serves: it offers its members limited liability protection and pass through taxation. An LLC exists as a separate entity from it owners or members. They are not directly tied to the operations of the business financially but do carry some limited liability, hence the name. Because of this fact the owners cannot be held personally responsible for the debts and liabilities of the business if there is a failure, which is one of the major disadvantages of a general partnership.

Advantages of an LLC

As mentioned above there are many advantages to forming an LLC compared to another form of business for your ventures. One of the most notable is the pass through taxation abilities of LLC's. Members of and LLC are not liable or held personally responsible for the debts of the company. There are also no ownership restrictions attached to an LLC. Members of an LLC also have much more flexibility in forming and structuring the management of the business. This helps many smaller businesses that don't need all the executive functions of a corporation, but are large enough to need the organizational benefits. Another of the reasons that people choose to form an LLC instead of a corporation is that there is much less paperwork needed at formation and each year thereafter. A corporation requires much more start up capital and paper work related to formation and maintenance of the business. Another advantage of an LLC that isn't directly connected with the business structure is the perception of customers. An LLC is more appealing and appears to be much more reputable than a sole proprietorship or partnership. This can be an advantage and draw more customers to you and in the front door. And one of the biggest, if not the most important, advantages is that you are not double taxed on the income through an LLC. This means that you don't have to pay taxes like a corporation would and then also a personal income tax on the money you received that was already taxed at the corporate level. An LLC removes the first form of taxation at the business level and the owners are only responsible for the personal income tax they owe from their wages in the company.

Disadvantages

There are some disadvantages to starting an LLC that should be noted. If any member of the LLC dies or goes bankrupt for any reason, this may require the LLC to be terminated depending on the conditions. Some people think that the concept and documentation of forming an LLC is more complicate than other forms of business. It is also more difficult and tedious for an LLC to go public and offer shares on the secondary market than for a corporation to do so. It may not always be easy to change an LLC into a corporation either.

Starting a Limited Liability Company (LLC)

If you are thinking of starting an LLC, there are some general guidelines to stick to when getting started. It is also important to keep in mind that the conditions you begin your LLC under may differ slightly from what is most common. There are slight variations from state to state and it is essential to make sure you are following correct procedure for the place you will be doing business. The LLC may also have to be structured differently depending on the type of business you are doing.

You need to choose a name for the company you want to start; it must normally include LLC at the end of the name to indicate to people that it is really an LLC and not a corporation or some other form of business. The name of your business is very important and carries more meaning than just some letters typed out on letterhead. Branding your business well is very important to your success.

You also need to make sure that the name you have chosen is available for use and is not being used by another company. This can present some difficult and frustrating legal issues if ignored. It may also be a good idea to avoid names or modify the one you have chosen depending on how similar they are to other business names. All of this is intended to avoid confusion.

Then you need to complete the necessary paperwork including registering your LLC name and making it a fictitious business name. You must also draft your LLC articles of organization to make sure that the way the company will function is clearly spelled out. This is a very important step and can help you avoid headaches later on. Then these articles of organization need to be filed with the Secretary of State office in your state. You must also be prepared to pay the appropriate fees associated with forming the LLC to the various agencies that help and facilitate its creation.

It is also highly recommended that you draft an operating agreement with any other members so that roles in the company are clearly spelled out. This will help define the responsibilities and obligations of each individual and also set forth the expected benefits for each person. This will make the launch of your business more smooth and ensure that things get started on the right foot.

And finally you must obtain business licenses and permits for you LLC from the federal, state, and local governments that will cover the operation of your business. If you haven't prepared properly and decided that forming an LLC is really right for you and the form of business you want to do, this process can become complicated and, at times, tedious. Make sure that you are familiar with processes wherever you are to avoid confusion, embarrassment and wasted time and effort throughout the process. It may be a good idea to consult with a business attorney to help you form the LLC properly.

Be smart

No matter what type of business it is, starting can be very difficult and frustrating. There may be a lot of pressure to start the business quickly and to make sure that things get off the ground well from day one. But rushing when you are organizing a business can come back and haunt you if you are not careful. There are always legal concerns when you are starting a business and they law is not forgiving of ignorance when you do something wrong. Make sure that you inform yourself well and that you use any resources available to you within your means. One of the most common recommendations is to use an experienced business lawyer. There are many who even specialize in the formation of LLC's. They will be able to help through the process and the money that you spend on their services will be well worth the expense. You should always make sure that you are in compliance with local, state and federal regulations and laws when you are forming a business. An attorney will help you to do this without committing any type of fraud or misrepresentation. Be honest with yourself and with the people you do business with.