Is A Limited Liability Company (LLC) Right
For Your Small Business Venture?
So, you'd like to start a Limited Liability Company, or so you think. But
what exactly is a Limited Liability Company and where do you start?
Read on for information that can help you decide if a Limited Liability
Company is for you information on how to get started.
What is a Limited Liability Company (LLC)?
LLC Stands for Limited Liability Company. A Limited Liability Company is a
legal entity existing separately from its owners.
Advantages
The main advantage of an LLC is limiting the liability of its members. This
means the members are not liable for the debts and obligations of the
limited liability company.
Also, there is a pass-through taxation, meaning the LLC is not subject to
double taxation on its earning. Members of the LLC have greater flexibility
in structuring the company, including the ability to divide ownership and
voting rights in unconventional ways while still enjoying the benefits of
pass-through taxation.
Disadvantages
Really, the only disadvantages are the work, time, and expense involved in
starting an LLC, along with the record keeping needed after the formation of
the LLC.
Now that we've answered your question, "What is a LLC?" and now that you know the advantages and disadvantages of a Limited Liability
Company, if you feel LLC is the way you'd like to go, than below please find
a list of requirements that can help get you started.
Requirements
Please be advised that your list may vary slightly depending on the specific
type of business, or the location of you business.
1. Name you Business: Choose your name carefully. It is important for
marketing yourself and your business. Make sure your business name is
unique, if your name or trademark is too much like another business there is
a chance you could be sued. Be sure to include "LLC," "Limited Liability
Co.," or a similar variation of LLC to your business name, which is required
by most states.
2. Search Availability: Be sure to check the availability of your
proposed LLC business name, also be sure to check for similarities to
existing business names. Here are some places you can search for names.
• Secretary of State: Contains a database of names of corporations, limited
liability companies,
limited partnerships and limited liability partnerships that have already
been registered.
• Department of Revenue: Contains a database for names of businesses that
have already been
registered.
• US Patent and Trademark Office: Contains a database for trademarks already
registered.
• Department of Licensing: Contains a database of trade names already
registered.
Your local telephone book and websites are also good resources in finding
names that have already been used.
3. Register: Register your LLC name. Depending on your state,
sometimes you register your LLC directly with the state, or it may be with
the county clerk, in the county where your business is located. (This
registration may also be called a certification or filing.) The name will go
on a state FBN list.
4. Operating Agreement: Create and sign an LLC Operating Agreement.
An operating agreement governs the working of your LLC. It allows you to
structure your financial and working relationships with co-owners in a way
that is suitable to your business. While many states do not require you
legally to have an operating agreement, having one helps your LLC by
guarding your limited liability status, heading off financial and management
misunderstandings, and making sure your business is governed by your own
rules. Here are
some things you might want to include in your LLC Operating Agreement.
• Percentages of Ownership
• Distributive Shares
• Distributions of Profits and Losses
• Voting Rights
• Ownership Transitions
• Buy-Sell Agreement
5. Articles of Organization: Write your LLC's Articles of
Organization. Your "Articles of Organization" provide information to the
state to establish the existence of your new business. You must include the
following information in your "Articles of Organization."
• Limited Liability Company name and address.
• Nature of the Limited Liability Company business.
• Name and address of your Limited Liability Company's registered agent,
(the person who will be authorized to physically accept delivery of certain
legal documents on behalf of your LLC.) Some states many allow you to
designate the Secretary of State's office as your LLC's registered agent.
• Name(s) of manager(s) and members of the Limited Liability Company.
The "Articles of Organization" identify the organizer(s) of the LLC, who
initiate the organization process and who are responsible for signing the
articles of organization prior to filling them with the state. You can find
pre-printed articles of organization forms for most states on your Secretary
of State web sites.
6. File: Be sure to file you LLC's Articles of Organization with the
Secretary of State office in your state. After your LLC's "Articles of
Organization" are written and signed by the appropriate members, they are
ready to be filed with your Secretary of State's office. You will be
required to pay a filing fee, which may vary depending upon the state of
organization.
7. Business Licenses and Permits: Obtain business licenses and
permits from the appropriate organization pertaining to you business. These
organizations include:
• Federal Government
• State Government
• Local Government
You should be able to find helpful information and the appropriate forms
available at each of these government web sites in order to obtain the
appropriate licenses and permits need to start your Limited Liability
Company.
While forming a Limited Liability Company may seem to be a long and
complicated process, the long term benefits out weigh the work involved
needed to start you LLC business. Be sure that when you start your Limited
Liability Company your new business complies with your state's legal
requirements and that you meet all the steps required in forming your LLC
business.
Starting a Limited Liability Company involves many personal and financial
decisions and some of those decisions can be life altering, so please be
sure that if you have any questions regarding the decisions you are making
regarding the formation of your Limited Liability Company, be sure to ask
for professional advice from the appropriate source.
For more information, visit
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information.
