An LLC or limited liability company is a business structure that allows for the protection of the owner/s from personal liability resulting from business debts, very much like how it is in a corporation. Unlike it however, an LLC do not pay corporate taxes since it is a pass-through entity. As such, the losses or profits of an LLC are passed through to it’s members who will in turn report them on the personal tax return, very much like in a partnership/sole proprietorship. These two important benefits are the reasons why many businessmen are filing for an LLC instead of other forms of business structures.
Filing for an LLC is actually much easier than forming a corporation. The basic steps in filing for an LLC are the following:
1.Think of a name for your LLC that will comply with the LLC rules provided in the state where your business is located;
2.File the Article of Organization of your LLC and pay the required filing fees which ranges from $100 to $800, depending on the state’s rules;
3.Prepare your LLC’s operating agreement. This is for the members of the LLC which lists down their rights as well as their responsibilities;
4.There will be a need in a few states to publish a notice of the intent for filing for an LLC;
5.The last step would be to acquire the required permits and licenses in filing for an LLC.
It is best to know the details contained in each step. This may be done easily since information on filing for an LLC abounds in the internet. For instance, in choosing the name of the LLC, it is important to note that the name you choose is not the same as the name of other LLCs that are already in existence, that the name should be ended by an LLC designator, e.g., LLC, L.L.C., Limited Company, Limited Liability Company, etc. Other guidelines are provided about the choosing of the name online.
After choosing the proper name, you need not register it since it will automatically be registered upon your submission of the Articles of Organization, also called certificate of formation/organization. The Articles of Organization may be short and simple. It can even be prepared in a matter of minutes if you will choose to just fill up the forms provided by your state’s filing office.
With regards to the operating agreement, although many states do not require it when filing for an LLC, it is still ideal that you prepare one to give members clear-cut rules on the business operation and the ownership guidelines. An operating agreement may include the percentage interest of members, their responsibilities, their rights, how profits or losses should be allocated, etc.
The publication notice is needed in some states to make the LLC’s existence official. It could be done by publishing it in the local newspaper where you will need to indicate your intent in filing for an LLC.
When all of the above are done, your LLC is now official. For you to be able to operate however, you need to secure the pertinent permits and licenses such as a business license, a zoning permit, a seller’s permit (if applicable) and a federal employer ID number.