Limited Liability Company
1. What is a Limited Liability Company?
2. What is the Structure of an LLC?
3. What are the Advantages of an LLC?
4. What are the Disadvantages of an LLC?
5. Do I need an Attorney to form an LLC?
6. How many people are needed to form an LLC?
7. How is an LLC Managed?
8. What is a Registered Agent and is one needed?
9. Should I choose an LLC or an S Corporation?
10. How can I structure an
LLC to achieve pass-through taxation?
11. What is an LLC Kit?
12. What is a Federal
Employer Identification Number?
13. How do I begin the
process of forming an LLC for my business?
1. What is a
Limited Liability Company?
A Limited
Liability Company ("LLC") is a separate legal entity that offers an alternative
to partnerships and corporations by combining the corporate advantages of
limited liability with the partnership advantage of pass-through taxation. An
LLC is created and comes into existence when articles of organization are filed
with the proscribed fees, and accepted by the proper state authority.
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2. What is
the Structure of an LLC?
An LLC
is owned by its members. The members of an LLC are like partners in a
partnership or shareholders of a corporation. A member will more closely
resemble a shareholder if the LLC utilizes a manager or managers, because under
that situation the members will not participate in the management of the LLC.
However, if the LLC does not utilize managers, then the members will more
closely resemble partners because they will have decision making powers in the
LLC.
The
member’s ownership in the LLC is represented by their respective "membership
interest", in the same manner as a partner has an "interest" in a partnership or
a shareholder has stock in corporation.
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3. What are
the Advantages of an LLC?
Pass-Through Taxation:
LLCs allow for pass-through taxation, allowing earnings of an LLC to be taxed
only once. The earnings from an LLC are treated in a similar manner as earnings
from a partnership, sole proprietorship and most S corporation.
Limitation of Liability:
The member’s
liability is generally limited to the amount of
money which the member invested in the LLC. As a result, the members of an LLC
receive the same limited liability protection as do shareholders of a
corporation.
Flexible
Organizational Structure:
LLCs are generally free to establish any organizational structure agreed upon by
its members. Thus, profit interests may be separated from voting interests.
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4. What are
the Disadvantages of an LLC?
The possibility of
losing pass-through taxation if the LLC is not properly structured.
More paperwork and
documentation is needed than in an ordinary partnership.
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5. Do I need
an Attorney to form an LLC?
No, an
attorney is not a legal requirement of forming an LLC. However, certain
knowledge is necessary in order to properly file the required documentation in
the designated state.
You can
use our guaranteed services to form your LLC, and save a substantial amount of
money you would otherwise pay an attorney. However, if you need legal or
financial advice as to the type of entity which would best suit your business
needs, consult your attorney or financial advisor.
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6. How many
people are needed to form an LLC?
An LLC
must have at least one member in all states except Massachusetts, where a
minimum of two members is required.
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7. How is an
LLC Managed?
An LLC
is managed by its members or by selected managers.
If the
LLC is managed by its members, it operates much like a partnership. Each member
shares equally in the decision making process of the LLC.
Alternatively, the members may choose to appoint a manager or managers to act in
a capacity similar to a corporation’s board of directors. The managers are in
charge of the business affairs of the LLC.
If
managers are not designated in the articles of organization, the members will be
deemed to direct the business affairs of the LLC.
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8. What is a
Registered Agent and is one needed?
In all
states, an individual or service company must be responsible for receiving
important legal and tax documents. This service is provided by an "agent" of the
LLC who is "registered" with the state of incorporation. Thus, the term
"Registered Agent." The registered agent must have a valid street address within
the state of formation, and be available during normal business hours to receive
documents.
The
services performed by a registered agent may include:
-
Receiving and
forwarding legal documents.
-
Receiving and
forwarding tax and report forms.
-
Accepting and
forwarding service of process.
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9. Should I
choose an LLC or an S Corporation?
The
status of an S Corporation provides the elimination of double taxation. However,
the S Corporation does not have the flexibility of an LLC in regard to the
allocation of income to its members.
An LLC
may have an unlimited number of members. However, ownership in an S Corporation
is limited to no more than 75 shareholders. Further, an S Corporation cannot
have shareholders who are C Corporations, other S Corporations, certain trusts,
LLCs, partnerships or nonresident aliens.
LLCs are
permitted to own subsidiaries without restriction, while S Corporations are not
allowed to own 80% or more of another corporation’s shares.
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10. How can I
structure an LLC to achieve pass-through taxation?
If an LLC
wants to take advantage of pass-through taxation, it must meet certain
requirements which have been established. To have pass-through taxation an LLC
may not have more than two of the following characteristics of a corporation:
-
Limited Liability
-
Unlimited Life
-
Free Transferability of Interest
-
Centralized Management
The LLC
will have limited liability, and if the LLC is managed by managers, the LLC will
have centralized management.
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11. What is
an LLC Kit?
Once an
LLC has been legally formed and is ready to complete its organization, it will
require an "LLC Kit" to complete its Operating Agreement, maintain certain of
its required records, and to facilitate distribution of membership certificates.
The LLC
Kit will include:
-
LLC Seal
-
Operating Agreement
-
Membership
Certificates
-
Book/Binder
-
Miscellaneous Forms
A LLC
Seal is a small press into which a document is placed to be embossed. The
imprint made by the seal indicates the LLCs name, state of formation and date of
formation. An impression made by an LLC seal helps to conveys the mark of
authority upon business documents.
A
Membership Certificate is a printed document used to indicate ownership interest
in an LLC. The LLC Kit supplied by Quick Incorporators LLC contains
custom-printed membership certificates which may be issued at the discretion of
the LLC.
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12. What is a
Federal Employer Identification Number?
Once
the LLC has been formed and is ready to do business, it is the time to apply for
a federal employer identification number (EIN). Generally, any LLC doing
business within the U.S. is required to have an EIN. In fact, the EIN is
necessary when filing tax returns and for establishing bank accounts.
A LLC
can receive an EIN by completing and submitting IRS Form SS-4. However, you can
have Quick Incorporators LLC save you this tedious and time consuming paperwork
by completing and submitting the necessary EIN form on your behalf.
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13. How do I
begin the process of forming an LLC for my business?
Once
you have decided the type of business entity which is best for your business,
articles of organization must be filed with the proper state agency together
with certain fees.
Quick
Incorporators LLC will provide all necessary services to ensure that the
administrative processes are completed in the shortest period of time, with the
highest degree of skill and efficiency, and at the lowest cost.
After the
articles of organization are filed and accepted by the designated state, your
LLC must hold an organizational meeting and adopt a proper Operating Agreement.
The necessary Operating Agreement recording material, LLC seal and membership
certificates are all included in Quick Incorporators LLC’s LLC Kit. |
