WHAT IS AN LLC (Limited Liability Company)?

A limited liability company (LLC) is the US-specific form of a private limited company. It is a business structure that can combine the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation. An LLC is not a corporation under state law; it is a legal form of a company that provides limited liability to its owners in many jurisdictions. LLCs are well known for the flexibility that they provide to business owners; depending on the situation, an LLC may elect to use corporate tax rules instead of being treated as a partnership, and, under certain circumstances, LLCs may be organized as not-for-profit.




#1 Personal Liability Protection

LLCs provide personal liability protection. This means your personal assets (car, house, bank account) are protected in the event your business is sued or if it defaults on a debt.


#2 Tax Benefits

LLCs have options to customize their tax structure. This allows businesses to use the best tax strategy for their circumstances.


#3 Inexpensive to Form

LLCs are generally inexpensive to form and maintain. The main cost of forming a limited liability company (LLC) is the state filing fee. This fee ranges from $40 to $500, depending on your state.


#4 Easy to Form

Compared to C corps and S corps, LLCs are very easy to start. You should be able to form an LLC on your own without the help of an attorney.


#5 Less Paperwork

Corporations are more regulated than LLCs and have considerably more paperwork. LLCs are not required to have a board of directors, keep meeting minutes, or hold shareholder meetings. This means much less time and money spent on keeping records and filing compliance-related documents.


#6 Management Flexibility

LLCs can decide between member-managed vs. manager-managed structures. Member managed means that the members are actively involved in managing the company’s operations. In a manager-managed LLC, the members delegate the responsibility of managing the company to a manager, who may or may not be a member. In this case, some, or all, members may act more as passive investors. LLCs also aren’t required to have a board of directors which allows management to be more independent.


#7 Growth Potential

LLCs can grow in profit and risk because they provide personal liability protection and tax benefits.


#8 Credibility and Consumer Trust

LLCs generally earn more trust from both banks and consumers than do informal business structures like sole proprietorships. This can impact a business’s ability to take out loans and can affect marketability.


American Map



#1 Select Your State

For most new business owners, the best option is to form an LLC in the state where you live and plan to do business in.


#2 Name Your LLC

Choosing a company name is the first step in forming an LLC. You will need to complete a company name search online to ensure that your LLC name is unique and that you meet your state’s naming guidelines.


#3 Choose a Registered Agent

A registered agent is a person or business that sends and receives legal documents on behalf of your company. These documents include official correspondence, such as legal subpoenas and state filing notices. Most states require every business to nominate a registered agent when forming an LLC. Your registered agent must be a resident of the state in which you do business or a corporation authorized to do business in that state.


#4 File LLC Articles of Organization

To formally create an LLC, you will need to file your formation documents with the state’s business office (usually the Secretary of State). In some states, the Articles of Organization are called a Certificate of Formation or Certificate of Organization.


#5 Create an LLC Operating Agreement

An LLC operating agreement is a legal document that outlines the ownership structure and member roles of an LLC. There are six main sections of an operating agreement: Organization, Management and Voting, Capital Contributions, Distributions, Membership Changes & Dissolution.


#6 Get an EIN

An Employer Identification Number (EIN), also known as a Federal Employer Identification Number (FEIN) or Federal Tax Identification Number (FTIN), is like your LLC’s Social Security Number (SSN). You need an EIN to hire employees or open a business bank account.

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