Web Success Portal guided me through forming a Limited Liability Company. Below is everything you need to know about forming an LLC.
Web Success Portal helped me to navigate LLC formation with these four easy steps:
Choosing A Business Name
When choosing your business name, it is important to consider branding or marketing purposes and the legal requirements for naming your business available in your state. Some general tip while naming your business is that you can’t use a name already used by another company.
Also, you would need to add a limited liability company or LLC behind the name. To know your state’s LLC naming requirements, you can visit the state agency responsible for business filings website.
Designate A Registered Agent
Anyone from 18 years and above can be a registered agent. You can also name yourself, an employee, or an agent company as the designated agent. The designated agent is to receive official or legal documents on behalf of the LLC, to be subsequently passed to the owner(s).
Fill Out And File Your State’s Article Of Organization form
Some states refer to it as a Certificate of Formation and others as an Article of Organization. You need to file this form with the agency that handles business filings in your state to establish your legal identity.
You can find the form on the website you used to research your business name. Some states require that you publish a notice of your desire to register an LLC in the newspaper before filing.
You must carefully check through the documents to ensure that no mistake has been made. You will need to pay a filing fee that varies from state to state. Upon approval, you will receive a Certificate of Registration. You can use this to set up your business bank account and tax ID number.
Creation Of Operating Agreement
Your operating agreement constitutes details of the financial, legal, and management rights of the members of your company. It could also include profit distribution and capital contribution tactics. More generally, it should contain information relevant to your company’s operations.
Benefits Of Forming A Limited Liability Company
A limited liability company is not considered a separate tax entity and thus isn’t taxed directly. Instead, the members of the company pay through their income tax. However, some LLCs are classified as corporations for tax purposes. So, checking if your business falls into this category is necessary. You can subsequently change your classification status.
An LLC protects its owner(s) against business liability and debt. In case of loss, debt, or a lawsuit, You can liquidate only the company’s assets. This is unlike partnerships or sole proprietorships, where the owners’ assets are vulnerable. This is one of the benefits of forming an LLC.
An LLC has fewer operational complexities, costs, and paperwork. The management structure is flexible as it doesn’t require a board of directors, strict record-keeping, or annual meetings.
The company also provides flexibility in allocation and profit sharing. External investors can also invest in the business without ownership. Members can also reach a consensus to allocate resources differently, not necessarily ownership percentage.
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