Start an LLC
As a new or small business owner, you’re exploring all of your options for taking care of your company’s legal and tax paperwork. We understand that it can be extremely overwhelming to know where to begin or what the right option is for your brand.
At LegalZone, we can help you form your LLC effortlessly and without breaking the bank. But before starting the paperwork, it’s crucial to know what an LLC would mean for your company.
What Is an LLC?
LLC stands for Limited Liability Corporation and is an excellent option for new and small businesses. An LLC bends the best features of a corporation, sole proprietorship, and partnerships to protect you and your business.
In the United States, LLCs take advantage of pass-through taxation and limited liability to cover all of your bases. Your personal taxes and LLC will still be tied together, but your business becomes a separate entity for debts and legal issues.
Do I Need an LLC?
Truthfully, no. You can start a business without an LLC.
However, an LLC has a lot of benefits for new and small business owners.
An LLC can help keep you (as the owner) safe from any legal problems and guard your personal assets. Forming an LLC also gives you the ability to open business bank accounts, develop and agree to contracts, hire employees, and obtain business permits and licenses.
What’s the Difference Between an LLC and a Corporation?
Corporations and LLCs both provide business owners limited liability protection.
With an LLC, owners don’t work as employees of the business but work as self-employed business owners. LLCs are taxed differently than corporations and are taxed like sole proprietorships or partnerships.
Corporate shareholders of a corporation operate as employees of the business. There are two types of corporations: C corporations and S corporations. C corporations have a 21% tax rate and are separate tax-paying entities than the owner. As pass-through entities, S corporation profits go through the business and use the shareholders’ individual rates for taxes.
LLCs offer a level of flexibility that corporations don’t. If you plan on owning business property, forming an LLC can save you from being taxed as a corporation and as a shareholder.
What Does Forming an LLC Mean For My Business?
Creating an LLC draws the line between your personal finances and business finances. Your LLC allows you to create a bank account specifically for your business. Keeping your monetary assets separated prevents you from losing your liability protection in a legal clash.
With your LLC, you’ll need to sign every business document as an owner or member of your business. On invoices, business cards, documents, and fine print, you’ll include “LLC” after your business title.
As the self-employed owner of an LLC, you’ll still pay quarterly income and self-employment taxes. You’ll need to stay on top of your state’s requirements for annual reports and fees. Partnering with a business accountant or an LLC provider can ensure you stay on top of the necessary paperwork and deadlines.
Your LLC guarantees that you’re the only business in your state with your business name. It also gives your business a flexible operating map that protects you from any legal disputes.
How Am I Taxed As an LLC?
Because of the flexibility offered by an LLC, you have the option of choosing how you want to file your taxes.
You can file as a sole proprietor as the owner of a single-member LLC. Or if you are a multiple-member LLC, you can file as a partnership. No matter how many members you have in your LLC, you can choose to file as a C or S corporation.
Your business adviser or accountant can help you decide on the best option for filing your taxes as an entity.
How Do I Form an LLC?
Forming an LLC usually takes around seven to eight steps depending on your business needs.
1. Name Your LLC
If you have a name in mind already, then you just have to check that the name is available in the state you’re filing in and that it complies with any state regulations.
2. File Articles of Organization
Certain states will label this document a “Certificate of Formation” or “Certificate of Organization,” but they all mean the same thing. This paperwork will encompass all of the basic information about your business and will be submitted to your state’s corporate filing office. More often than not, it will be the Secretary of State.
3. Choose a Registered Agent
Every LLC has to have a registered agent who is legally responsible for accepting documentation for the LLC if it gets sued. Any LLC member can represent the LLC as the registered agent, but they must have a registered address in the state the LLC is formed.
4. Decide How to Manage the LLC
Most LLC owners opt to be managed by the LLC members but can be managed by an outside agency. Managers are the key decision-makers on behalf of the LLC, which is why it’s extremely common for the managers to be internal employees of the business.
5. Draft an LLC Operating Agreement
Although most states don’t require it, having an operating agreement for your LLC establishes how you’ll manage your LLC. Without an operating agreement, the state will determine how your business will be managed.
6. Observe Tax and Regulatory Requirements
Stay on top of any extra documentation your LLC needs, such as an EIN, business licenses, and sales and employer taxes.
7. File Annual Reports
Renew your LLC each year in your state if necessary by paying a fee and filing an annual report.
8. Register Your LLC Out of State
If you want to expand your business to another state, you’ll have to file an LLC in that state as well. The requirements for forming an LLC in another state may vary, so it’s essential to research the requirements before filing.
Forming an LLC with LegalZone
LegalZone makes it simple for you to start an LLC online. We offer comprehensive services at a reduced cost, and our experts can help you get everything in order for your business. Start by telling us what you’d like to call your business and what state you’re in, and form an LLC with LegalZone in minutes.