Starting a business always carries a number of potential risks. Establishing a corporation through these volatile economic times can be disadvantageous. This is especially true if you?re putting together one on your own or for the first time. If you are searching for an option that?s less formal but is really as flexible as a corporation, forming an LLC might be your best option.
LLC is an acronym for Limited Liability Company. It is a hybrid business model integrating the limited liability feature of a corporation and integrating it with the operational flexibility of a partnership. It is a model growing in popularity with small businesses across the nation. Despite its mixing of the two essential options that come with a corporation ad partnership, it?s not one or the other ? it?s its own type of business unit.
Its introduction in 1977 makes this business model relatively new to the US. In other parts of the world, it dates further back and comes with different statutes and guidelines. In the US, ?partners? of an LLC are generally known as ?members.? Members benefit from incorporation while keeping a small business setup. Very much like a partnership or proprietorship, members report losses and profits on their individual tax returns. Just like a corporation, members have protection from personal liability ? this means, they?re not responsible or accountable for any company debts.
One of the greatest things about the formation of an LLC is the fact if the company encounters any legal trouble, only company assets are at risk. Creditors can?t go after any members and their personal assets. Many prefer to form an LLC for that reason alone.
Although each state has their own set of guidelines, listed here are some general principles when forming an LLC.
- Choose a Business Name ? When it comes to this regard, your company?s name needs to be distinct from other entities in the state and needs clear labeling as an LLC. Some states also restrict the use of certain words such as bank and insurance. Be mindful of prohibited words upon setup.
- Filing of the Articles of Organization ? This document is a complete overview of your company. It has essential information such as your business name, its address, and its members. Additionally, it documents the stocks that the company may issue and legitimizes the operation of your enterprise.
- Operating Agreement ? Here is the written code of conduct for your LLC. It serves as a binding contract among members and needs formal adaption and amendment. Although it is not needed in most states, the general recommendation will be to draft one if you?re to form an LLC.
- Licenses and Permits ? Regulations vary according to industry, and also by state. Consulting with a knowledgeable document filing company comes in handy while preparing and filing the necessary documents.
Operational ease is one of the greatest advantages of an LLC. Because this is the case, there is the option to file paperwork on your own or employ a third party tocarry out the work for you. An external group (online document filing services) can help you save time, energy, and resources. In addition to their expertise in filing documents, they may also answer all your questions during setup.
Holly Nolan is a business consultant who has numerous years of experience forming an LLC and has helped many clients form an LLC.
Source: http://www.articlestem.com/business-and-industry/legal/form-an-llc-with-ease-2/
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