LLC stands for 'Limited Liability Corporation'. It's a business structure regulated by state statutes. Each state has different forms and fees needed to begin and maintain an LLC. incorporate.com will complete the state forms on your behalf and will submit the state fees as part of your purchase price when you order an LLC. An LLC is not a corporation, although it provides similar liability protection to its members. It's not difficult to learn how to start an LLC, and we here at incorporate.com are here to help with any questions.
Limited Liability Company (LLC) FAQ
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It doesn't have to be hard to find out how to start an LLC. The first step is to decide which state to form in – usually your home state or Delaware. This determines how to register an LLC. Then, determine the number of partners your LLC will have. Many states allow single-member LLC's, and the number of members has no upward limit. Finally, you would submit your order through incorporate.com and we will file your paperwork with the state that you selected and pay the state fees as part of the purchase price. It is also a good idea to create an operating agreement showing how the profits of the LLC will be divided.
An LLC has several benefits. The primary benefit is that is protects your assets, and the assets of your partners, by limiting the liability for acts and debts of the business. In addition, an LLC provide for pass-through taxation. Each partner pays taxes individually on their portion of the LLC profits. An LLC allows income to be divided on a basis other than ownership percentage if desired. In addition, when you look into how to create an LLC you will find that it is less costly and complicated to set up and maintain than a corporation.
An LLC provides individuals with three important protections. First, members of an LLC are covered by state shield laws that limit their liability exposure for acts and debts of the LLC. Second, depending on the law of a specific state, the charging order often holds that creditors are limited to each member's share of distributions, and that creditors cannot go after the LLC's assets to settle a member-debtor's obligation. This protects non-debtor members from financial loss.
Documentation is an important question as you look into how to start an LLC. An LLC needs a document called Articles of Organization to be filed with the appropriate state agency. Then, an operating agreement should be formed showing the rights of the members and the rules of the company. These legal documents can be obtained quickly and easily online through Incorporate.com. You may also need a tax identification number issued by the IRS which can also be obtained through Incorporate.com.
C Corporations experience 'double taxation', where the IRS taxes both company profits and shareholder dividends. An LLC avoids this difficulty. While an S Corporation shares the pass-through taxation benefit with an LLC, it may limit the number and nationality of owners. An LLC also requires much less record-keeping than any type of Corporation.
A Series LLC is an LLC that has different sets of ownership or LLC interests. In the state of Delaware in particular, an LLC can register separate series. Though this type of structure is uncommon, it can provide liability insulated divisions within a single company, and can save the cost and time of forming multiple LLCs.
An LLC is non-incorporated, so it cannot issue stock. An LLC can elect to have the tax rules of a corporation applied, but that election only covers tax treatment. It is not a corporation in any other way. You can, however, have more partners join the LLC and bring in additional investment money.
Once you've determined how to become an LLC, you'll need to maintain your company's status. Fortunately this is much less complicated than maintaining a corporation. All you need to do is pay proper taxes, keep good financial records, and pay any state franchise taxes and annual fees.
The cost to create an LLC consists of state paperwork fees and service fees. incorporate.com will include both fees when you purchase an LLC and all of the fees are itemized for your review.
An LLC has the benefit pass-through taxation, which means the company itself is not taxed on its profits. Instead, all profits pass-through proportionally to the members. Each member is then responsible for stating the income on their returns and paying all needed taxes. An LLC can also choose to apply other tax rules to their company, including S-Corp or C-Corp rules as long as the proper form is filed with the IRS. The flexibility of an LLC to choose how to be taxed is one of the benefits of creating an LLC.
An EIN, or Employer Identification Number, is needed for an LLC that has two or more members. A single-member LLC that does not choose to be taxed as a corporation will not need an EIN, since the LLC will be treated as a 'disregarded entity' by the IRS. However, a single-member LLC that takes on partners or elects for corporate taxation will need an EIN from the IRS.
A multi-member LLC will need the same tax forms as a partnership, and a single-member LLC will need the same tax forms as a sole proprietorship. The only change would be if the business chooses to be taxed as a corporation, in which case it would file a Form 8832 and use corporate tax forms.
There are a variety of 1099 forms used by the IRS. An LLC will use the form 1099-DIV for the payments made to each member. A 1099-DIV is required for any partner that received $600 or more from the LLC in a given year. The members will then use this form when they file their individual income taxes.
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