Do you have any questions about LLC’s? This FAQ There is an answer to every question on the page
In general, you should form an LLC before you ever need its limited liability protections. This means that the best time to form an LLC is before you start selling products or services, hiring employees, or opening a business bank account. There’s really no harm done in forming an LLC before you actually need it, but there are plenty of significant risks if you wait too long.
LLCs offer the liability protection of a corporation with the simplicity and pass-through taxation of a sole proprietorship. LLCs are affordable and easy to maintain.
The standard processing time for forming an LLC is one to two weeks from the time the state receives the formation documents. Many states offer same-day or expedited LLC formation for an extra fee
The LLC member is another word for the LLC’s owners. In fact, you’ll often see the phrase “LLC owner/member,” because these words mean the same thing. For the purposes of an LLC, membership equals ownership.
The LLC organizer is simply the person (or business entity) who prepares and files your business formation documents.
A multi-member LLC is an LLC that is owned by more than one person.
A single-member LLC is an LLC that is entirely owned by one person.
A series LLC is a collection of LLCs that operate under the umbrella of a master LLC. While each LLC in the series is part of the larger company, this business structure also keeps each LLC financially insulated from the others. In theory, this means that a lawsuit against one of the LLCs should have no effect on the others in the series.
Unlike corporations, LLCs are not required to have a board of directors. An LLC is typically managed by its members, unless the Articles of Organization appoint a non-member manager to manage the LLC.
LLCs don’t have shareholders and they can’t sell shares on the stock market. Instead, an LLC is owned by its members, who split the business earnings among each other. The way your LLC’s earnings will be divided should be explicitly stated in your Operating Agreement.
Yes, you can form an LLC in another state. If you already have a domestic LLC and wish to expand your business to another state, you will need to form a foreign LLC in that state. Generally it is not recommended to form an LLC in a state where you do not plan to conduct business.
An EIN is commonly referred to as either an Employer Identification Number or a federal tax ID number, and it’s essentially a Social Security Number for businesses. The EIN is used to open a business bank account, hire employees, pay taxes, and much more. An EIN is required for the vast majority of LLCs.
The corporate veil is the level of separation between your business and personal assets. If you operate your business in a fraudulent manner that invalidates your personal asset protection, the courts could choose to “pierce” your corporate veil, meaning that your creditors would have access to your personal and business assets alike.
An annual report is a rather simple yearly filing that updates the state about some important details of your business, like your address, name, registered agent, and more. There are a few states that don’t require annual reports, and several others that only require filings on a semi-annual basis.
The limited partnership is a business type that requires at least one general partner and one limited partner. General partners carry significant risk in LPs because they have unlimited liability, while limited partners enjoy the same personal asset protection as LLC owners do.
This makes the LP a more appealing entity type than the LLC for investors. Also, LPs are eligible for many more deductions than LLCs are. However, the high liability burden on general partners is a big disadvantage for LPs, and the specific nature of the business structure isn’t as flexible as that of an LLC.
There are a few major differences between these two entity types. The corporation is a much more rigid business structure, with a lengthy formation process, a strict management procedure, and many formalities to adhere to.
Most importantly though, corporations are usually subject to “double taxation,” which means your profits are taxed first on the corporate level and then again on the personal level when they’re paid out as distributions. LLCs get to choose from several different taxation options, most of which are cheaper than the options available to corporations.
Corporations also have more established legalities, as the LLC is a more recent business structure.
A doing business as (DBA) name gives sole proprietorships and general partnerships the ability to use assumed business names rather than the personal names of their owners. However, the DBA is not an actual business structure, and it also doesn’t provide your business with exclusive rights to your assumed name. This means that informal business entities still do not have personal asset protection even with a DBA, and their names aren’t protected like they would be with an LLC.
Nope! You don’t need to be physically present in America to form an LLC. You also don’t need to be an American citizen or resident. Just about anyone can set up an LLC, which is part of the reason this is such a popular business entity type.