Creating an LLC is not complicated, but it can be confusing. There are many options to consider when setting up your new business entity, and the steps may seem overwhelming. To help you get started, we’ve put together a quick guide for understanding how to set up an LLC. We’ll cover some of the most important topics below.
What Is An LLC?
An LLC is a type of company that allows you to provide for your limited liability and still be taxed as if it were a partnership. To start an LLC, just file the necessary forms with the Secretary of State or other designated chief-permitting agency in your state.
You don’t have to go through any audits or approvals beforehand, though some states may require them before they’ll record your articles of organization. As explained by the team at FinancePond, an LLC can have one member (a single person) or many members who are individuals or other companies. All owners receive protection from personal liability by filing articles of organization, which limits their legal exposure when operating the business together under statutory provisions governing corporations but permitting greater flexibility than traditional corporate law requires.
To do this, professional help is recommended, especially if your goal is not only starting an LLC but also keeping it going throughout the future years while operating as a business owner/entrepreneur. It’s important because there are specific rules and requirements when it comes down to establishing what’s considered a valid business entity, which includes everything from selecting a name – finding out who can invest into the said company – all within compliance with local laws.
Setting Up The LLC
The first step is choosing where to create the LLC. There are several options available depending on which state you live in and what kind of tax benefits you’re looking for. For example, if your main office is located in Texas but most employees are operating out of Minnesota then creating an LLC through Texas might be best because that way limited liability protection would apply everywhere within the United States while running all operations under one umbrella company instead of two separate entities (the parent company is based out of Minnesota). This option may be more expensive, though.
Once you’ve chosen your state and filled out the necessary forms, it should take between four to six weeks for everything to be processed properly. The application process includes filing articles of organization with the Secretary of State’s office, as well as paying a fee that could vary depending on where you live. You will then receive an LLC certificate that proves your business officially exists, and this can serve as proof against any legal issues down the line if needed (not required). Your company name must follow certain guidelines, so make sure not to use anything trademarked or restricted by law to avoid problems later on when getting started using said service/product.
How Is An LLC Taxed?
An LLC is a pass-through entity. As such, it does not pay taxes on its income directly. Instead, the tax liabilities will be passed through to the members of the business as their shares of profits from operations are calculated and distributed according to state law. In most states, an individual member’s liability for corporate debts ends with his or her investment in the company; however, some states impose personal responsibility upon each owner up to that amount until they can recover any remaining funds owed by other owners within a limited period. Usually, this only occurs when all available assets have been exhausted and creditors must turn over unpaid invoices to collect what monies remain due them. Additional protection generally comes from incorporating your business rather than simply forming an LLC.
Can My Spouse Or Children Own Part Of My Company?
An LLC is a great way for families to co-own businesses because it allows them to avoid being taxed as a partnership. In this case, the business owner(s) would be responsible for all of the tax responsibilities associated with running their company while excluding other members from personal liability. So if you were a single person who owned a 100% interest in your LLC and then married or had children, they could still own an interest in that same LLC without getting hit by gift taxes or estate taxes since there’s no taxable income involved when filing jointly on an individual return (which would normally happen if someone was gifted ownership). Even though you can add family members after forming your business, make sure any new partners are aware of their rights and expected responsibilities before they join up.
To conclude, LLCs are a great way to protect your assets and ensure that you have the flexibility needed when it comes to taxes. If you need assistance setting up an LLC, make sure you find someone who knows what they’re doing.
Read Also: How to Choose an LLC Registered Agent?