So, you’re considering going into business for yourself. Congratulations! When creating a new company, there are a lot of different aspects to believe in, but selecting the appropriate legal structure for your company is one of the most crucial aspects. Before deciding to form a limited liability company (LLC), there are a few considerations you should first make to determine whether or not this business structure is suitable for your firm.
In this piece, we will discuss the most critical aspects of limited liability companies (LLCs) and help you choose whether or not a company structured in this manner is the best option for your company. Not all limited liability companies (LLCs) are made alike; some will provide you with a higher level of security for both your company and your assets compared to others. When searching for an LLC, what characteristics should you prioritize? The following are essential considerations to keep in mind:
The State where the LLC Is Registered
Because limited liability companies (LLCs) are created under state law, and that legislation varies by state, the state where the LLC is based is a significant factor. The formation of limited liability companies with a single member is legal in some but not all jurisdictions. Filing costs to form an LLC might vary by the hundreds of dollars in certain states. Creating a limited liability company may be more straightforward in certain conditions than in others.
When picking between a limited liability company
(LLC) and other business structures, such as a corporation or a partnership, it is vital to consider both the structure’s implications and your state’s laws and regulations. The primary perk of an LLC is that its owners have “limited liability,” but this comes at a cost. Whereas corporations may write off losses against future profits, LLC owners in many jurisdictions are restricted in how much of a beating they can deduct.
The Company’s Membership Structure
The terms “limited liability corporation” (LLC) or “S-corp” (Simplified Corporation) may come up in your research into business formation. Each organizational form is viable for some businesses, but essential distinctions must be considered before settling on a final choice. As the name implies, a single-member limited liability company has just one member.
For all intents and purposes, including taxes and liability protection, you will be the “member” of the business, and the entity itself will be considered your personal property. It’s helpful for sole proprietorships or other small enterprises where one individual wishes to have a complete say in overall operations. Unfortunately, this may become an issue if the firm requires more capital than you can provide.
In this case, you would have to increase your investment in the company to increase its cash flow. This isn’t too much of a problem if you’re beginning a small catering business out of your house, but it might become arduous if you’re planning on opening a storefront for your company.
How the Limited Liability Company Is Managed
When forming an LLC, management is of paramount importance. It is the members of the LLC, rather than the corporation as a whole, who will have ultimate control over all business operations. In addition to representing the LLC and its members in dealings with creditors and outside parties, these individuals have a fiduciary duty to do what is in everyone’s best interests. As long as they are compensated fairly, the LLC members will shoulder this duty. If you don’t pay them fairly, they may quit the firm, and it might be hard to locate a suitable replacement. You should devise a plan to prevent this and pay your members fairly for their efforts.
The Company’s Governing Documents
Your business will be based on the company’s governing papers, but you should also familiarize yourself with your state’s LLC rules and regulations. Check whether the provided templates meet your needs regarding clarity, simplicity, and completeness. The number of members, whether managers or just owners may manage, and whether members can act by unanimous agreement or need formal permission should all be specified in the articles of organization.
Another consideration is to what extent you’d want “boilerplate” limits (such as prohibitions on doing business with competitors or employees) to stay in place and whether or not they relate to your specific needs. Depending on your particular requirements and goals, you may need one or more of these papers to secure your business adequately.
The Corporation Center is an excellent resource for anyone looking to file paperwork with the state or federal government—they’re the experts in this area and have representatives available 24/7 by phone. Their call center representatives are ready to listen to your questions and help you over the phone or online. Once you’ve chatted with them, they’ll be able to tell you precisely what steps to take next to get your company registered as quickly as possible! If you’d like more information on how to set up an LLC, call (800) 580-4870 now.