You Can Form an LLC Online
When starting a company, many entreprenurs decide to form a Limited Liability Company (LLC) rather than incorporate as a corporation or s-corporation. Because an LLC provides easy management and limited compliance requirements, it has surpassed the corporation as the choice entity for small business owners. An LLC provides the same liability protection as a corporation without the corporate formalities. The owners of an LLC are known as “Members” and operate by rules set forth in the Operating Agreement, which can be modified with Members’ approval as the business changes and grows.
Small business owners who form an LLC have the additional benefit of less complicated taxation. Much like a sole proprietorship or partnership, LLC profits and losses are added to the owner(s) personal tax returns. Additionally, you may choose to form an LLC as an individual to reduce your personal liability and shield yourself from business debt or any potential lawsuits. The 1-Person LLC is now recognized in all 50 states.
To form an LLC, first the Member(s) must choose the state in which to form an LLC. The majority of small business owners choose their home state for convenience, in addition to avoiding any extra fees to forming an LLC in another state. For example, if you were planning to form your LLC in Nevada but operate your physical business in Texas, the state of Texas would require you to re-register your LLC as a “foreign corporation” (a company that was not originally formed in Texas) and you would typically be subject to all the same annual fees and taxes as an in-state company. There are valid reasons for some LLC’s to be formed in the business-friendly states of Nevada, Delaware or Wyoming but if you form an LLC in one of these states you will need to know that virtually every state has laws that require an LLC to re-register a Delaware, Nevada or Wyoming LLC in their home state.
Once you have chosen the state for your LLC formation, you can form an LLC online. Forming online is an efficient way to file your Articles of Organization or Certificate of Organization in accordance with state law. Starting the process to form an LLC can be done the same day with an online order, but processing the state paperwork will take longer depending on the state in which you form an LLC. Some states take 3 days, but others will take several weeks.
When you receive your LLC filing back from your state, you and any Members of your LLC will need to adopt the LLC Operating Agreement to determine the percentage of ownership by each member. The Operating Agreement is also the central document of an LLC and stands as the Members’ written agreement to resolve disputes and follow procedures. The Operating Agreement should include methods for adding or removing any Members, distributing profits and handling internal matters. Managing an LLC typically requires only one Annual Members’ Meeting to discuss and approve any changes to the Operating Agreement.
An LLC can be managed in one of two ways: Member-Managed or Manager-Managed. In a Member-Managed LLC, the business is managed with each Member participating in the company’s daily activities. In a Manager-Managed LLC, the company designates a manager or managers (who may or may not be a Member) to run the business day-to-day with the Members typically only involved as an investor. The most common way to manage an LLC is Member-Managed, especially for small companies that are looking for ease of management.
There are advantages to forming an LLC that might be right for you, including the safeguarding of your personal liability, building a separate business credit profile, adding creditability to your business, simplified management and protection of your 1-person company if you form an LLC as an individual. You can form an LLC online using an online incorporation service.
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February 9th, 2010 at 10:04 am
[...] LLC formation can be fast and easy if you know just a few hints to get started. LLC formation is almost a do-it-yourself task, actually, except for the necessary paperwork you need to file with your state and the few formalities you need to follow to make your LLC an official legal entity. Even with those steps, however, LLC formation is simple for those who know what needs to be done from the moment you decide to form an LLC. [...]