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What is an LLC?
A limited liability company (LLC) is a type of business entity you can register in your state. The main purpose of an LLC company is to limit the personal liability of its owners—like a C corporation or S corporation—but it also allows the business to operate with simpler, more flexible tax requirements.
Do I need an LLC?
An LLC isn't always required, but many small business owners choose to form an LLC for personal liability protection. Having an LLC can also help you open bank accounts, enter into contracts, hire employees, and get necessary business licenses and permits.
What does LLC formation mean?
When you form an LLC, you submit a specific set of business forms to the state where you wish to create a new business entity. Once it's approved, you can use this separate entity to record business expenses, take on business debts, file taxes, obtain business licenses, and more—and this is what gives you liability protection.
How easy is it to form an LLC?
You may be a little intimidated by the idea of forming a legal entity like an LLC, especially if it's your first time. All you need is an understanding of what your business will do, how you plan to run it, and your state's LLC filing fees. Even if your business requires a retail location, you don't need a physical address lined up to begin your LLC formation.
3 reasons for creating an LLC business entity
Protect your personal assets
By forming an LLC and keeping your personal finances separate, you can protect your personal assets from business liabilities.
Make things easier
It's typically easier to form an LLC than a corporation, and there are simpler rules for things like record-keeping.
Get tax flexibility
You get to decide how you're taxed—as an LLC or a corporation—to maximize your ability to save money and minimize tax liability.
There are several important differences between an LLC and a corporation:
LLC
Flexible management structure
LLC owners have more freedom to decide how the business is run and managed.
More taxation options
An LLC can choose to be taxed as an S corp or a C corp to maximize tax savings.
Minimal record-keeping
An LLC does not need to record minutes or hold an annual shareholder meeting.
Corporation
Easier to transfer ownership
A corporation requires a board of directors, but it's easier to transfer shares of stock than to alter an LLC operating agreement.
Unique tax deductions
A corporation can deduct certain expenses on tax forms like marketing costs and specific employee fringe benefits.
More appealing to investors
Unlike an S corp, a C corp can go public and issue stock to new investors, which makes it easier to raise revenue.
How to start an LLC
To form an LLC, you'll need to file articles of organization with the state. Each state has its own rules, but our experience across all states helps us keep things moving when we file on your behalf.
Here are a few things you'll need to keep in mind to get your LLC up and running.
Choose and reserve a name
It's wise to check your LLC name against similar businesses in your area. We include a business name check with our formation services and can reserve a preferred business name for you.
Pick a registered agent (RA)
Also called a statutory agent or resident agent, an RA receives your LLC's legal notices and legal documents during normal business hours. Most states require this, and we can do it for you.
File articles of organization
Also called a certificate of formation, this business form contains basic details about your LLC. When we file this for you, it's typically sent to the Secretary of State.
Determine licenses needed
You'll also need to apply for any specific permits or business licenses that may be required for compliance, although it's wise to wait until your LLC's formation documents are approved.
Prepare an operating agreement
This outlines your LLC's rules for everything from business structure to profit distribution. Our templates make it easy for LLC owners to define their rights and limit disagreements.
Get an Employer ID Number (EIN)
Most businesses need an EIN (also called a Federal Tax ID Number) to set up a business bank account, file taxes, and start hiring. When it's time to get yours, we can help.
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