In today’s world lawsuits are very common place. Individuals in business, whether large or small, specially need to protect their personal finances from these lawsuits. Forming a limited liability company (LLC) is one of the best ways to safeguard personal assets from business liability. Besides this, a limited liability company offers far more advantages.
Although there are certain formalities for registering and maintaining a limited liability company (LLC), which are not too difficult to complete. Average businessmen can easily fulfill the requirements of becoming an LLC. A common belief that you must hire an expensive attorney to handle this is no longer valid. There are several other options, for example, online legal documentation services that help create the documents and advise on how to fulfill the requirements to form an LLC by your own.
In order to become an LLC, you have to go through the following steps:
The first step is either to hire an attorney to prepare your legal documents to file an application for registration of your LLC, which is a bit expensive, or use free and easy to use services to prepare your documents and file the application yourself by reading guidelines available at their website.
In second step, if you have chose to file your application yourself, fill out Articles of Organization application for your state. You can find this by a little search on internet. Some websites even guide you how to fill your information for Articles of Organization and generate one when you have completed filling your particulars.
Thirdly, submit the forms along with mandatory state fees to the related office of the state. In most of US states, the concerned office is the office of The Secretary of State.
Finally, fill out SS-4 application and send it to the IRS to receive your Employer identification Number, or EIN. If you will choose to hire someone else to do this for you, it may cost you more than $100, so it is better to do it yourself and get EIN online and do so in minutes.
Limited liability company (LLC) exists as a separate entity from its members, just like a corporation; hence the members (owners) are not personally responsible for the debts and liabilities of the LLC. There is another great advantage of an LLC; that is, it allows pass-through taxation. The income of LLC is taxed at the entity level; however, Tax Return of LLC must be completed and filled. The members (owners) have an advantage that Income and loss of the LLC is passed through to the member(s) (owners) and they must report the income or loss of LLC on their personal tax returns.