Negosentro |Everything You Need To Know About LLC | As you create your new business, you may hear from many individuals about the benefits of forming an LLC to protect your personal assets and your company. The problem is there are many types of LLCs available, and sometimes an LLC may not be the business entity best for your type of industry. Although most people know that a limited liability company has many advantages that business owners can rely on, many don’t understand what the benefits are or how the liability limitations may affect their business structure or growth. Here are answers to the most frequently asked questions regarding business LLCs that may help you better understand if an LLC is right for you.
1. What is a limited liability company?
If you want to form an LLC in the United States, it is a business entity that has the limited liability of corporate structures mixed with the primary benefits of taxation allowed a sole proprietorship or partnership. This allows the LLC to have the best liability and tax benefits available. Once formed, the business becomes an entity that is separate from the owners or managers, but the business can still be tied to the owner’s personal taxes.
2. Are there pros and cons to an LLC?
Most of the benefits of an LLC stem from the taxes and structure of the entity. These advantages include liability protection, ease of profit distribution, few ownership restrictions, and pass-through taxation. The disadvantages stem from the same structure and taxes that allow for the pros; however, the problems with having an LLC are mostly tax-related. The cons include banking separation from personal, intense record-keeping required, termination required when a member leaves, and higher taxes.
3. Who can start an LLC?
Anyone over the age of 18 can start an LLC, and there are no current restrictions on who can become a member. Surprisingly, you don’t have to be a resident of the state to register your LLC within that state, either. With the limited requirements, corporations, other LLCs, and foreign nationals can become members in your LLC if you so desire.
4. Are there state requirements associated with LLCs?
Unlike most corporations, the LLC is not required by state law to keep business minutes or hold annual meetings. However, the LLC is required to have an LLC operating agreement. The OA is a document providing information about ownership rights, LLC standards, and member changes determinations. Although it is an internal document and doesn’t need to be filed with the state, all owners and members are required to agree to it. Some states also require an annual report to be submitted to the Secretary of State, with failure of submission resulting in the dissolution of the business.
5. What is an LLC member and how do they get paid?
A member is another term for the owner or owners of the LLC. There can be many members or an individual member, depending on how the LLC is set up. As to payment for services rendered in an LLC, there are no paychecks distributed to members. Rather, members are allowed to take distributions of profits. Since no taxes are withheld, members are required to report all draws.
6. How many types of LLCs are there to choose from?
There are currently 10 types of LLC entity programs to choose from, and although some may overlap in form or function, they are very different legal entities once they are established.
If you are wondering if an LLC is right for your business, you are not alone. Thousands of startups must decide upon the legal structure of their business each year. Even though starting a business has never been easier, knowing which LLC is right for your company can be more complicated. Establishing an LLC can do more than protect you from liability – it can also help your growing business with fewer paperwork requirements. It is an adaptable structure for legal entities that may be perfect for your small business.