![]() ![]() Create an Operating Agreement: Similar to a partnership agreement, this is not required by most states, but it is highly recommended to outline rules, regulations, agreements, how to settle disagreements in the future, and whatever else is relevant to your business. Just like the Articles of Incorporation, this is typically filed with the Secretary of State, but depending on the state your business is in, this may need to be filed somewhere else. It helps legitimize your business by including general information such as your business name, address, and the names of its members. File the Articles of Organization: This document is incredibly similar to the Articles of Incorporation that must be filed for a new corporation. Restricted words vary from state to state, but typically include “bank”, “insurance”, and so forth. Choose Your Business Name: This step has more requirements than a partnership or corporation and consists of three rules: it cannot be the same name as an existing limited liability company in your state, it must have “limited liability corporation” in the name, and it cannot include restricted words. There are five basic steps to setting up your limited liability company: A business owner can also chose to have their limited liability company to be taxed as a corporation or an S corporation.Ī limited liability company has the advantage of avoiding the difficult set up of a corporation. If a limited liability company has multiple members, the Internal Revenue Service will essentially treat the business like a partnership, which means that each owner is taxed on their share of the profits. This means that the Internal Revenue Service will tax your business as a sole proprietorship. ![]() Also, limited liability companies are allowed to operate with a single member, allowing a single member limited liability company to avoid having to pay corporation fees. While all limited liability companies do not pay federal income taxes, some states do apply an annual tax to limited liability companies. Just like a sole proprietorship or partnership, limited liability companies are able to have the earnings and losses from the business pass through to the owners to include on their personal tax returns. Limited liability companies essentially provide business owners with the ideal liability protection that corporations offer without the double taxation caveat. Limited liability companies are quickly becoming a much preferred business structure because of its hybrid nature of offering some of the best advantages of sole proprietorships, partnerships, and corporations. Other countries, such as Germany and France, have had similar business structures for years, but the first United States limited liability company formed was in 1977 in Wyoming, however it took around 20 years after that before other states started following suit the Internal Revenue Service did not even create a uniform set of laws for taxing limited liability companies until 1996! All in all, this is still considered a relatively new way of structuring a business. This is when business owner’s start considering the idea of classifying their business as a limited liability company, or LLC. may be compensated by companies featured on our site, which could influence product placement, though not all available offerings are included.Ģ023 © Business Credit America, Inc.With all of the overwhelming legal and tax complexities associated with incorporating a business, but the lack of liability protection for a general partner in any form of a business partnership, sometimes business owners cannot decide the best option for their business. Houston Mcmiller or Business Credit America, Inc. Reward value estimates are our own and are not endorsed by any card issuer. Responses and product evaluations are not endorsed by the bank advertiser or card issuer. Some links may be affiliate links, which support our content creation. All names, trademarks, and logos are the property of their respective owners. While we dedicate significant effort to updating our material, it is to be used as-is. Always consult with professionals aware of your individual situation for specific guidance. It is not intended as legal, financial, or professional advice, nor do we hold ourselves out as attorneys, accountants, or financial advisors. ![]() Disclaimer - The content on, including any associated YouTube videos, is designed to provide opinions and information on credit-related products. ![]()
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