Forming An Limited Liability Company Law Company Business Partnership Essay

Published Date: 02 Nov 2017

A limited liability company is a fusion kind of officially authorized structure that provides the limited or finite liability features of a company and the tax efficiencies and operational elasticity of a partnership based business.

The "owners" of a Limited Liability Company (LLC) are referred to as "members." According to the state, the members can consist of a single individual or person, two or more individuals or persons, corporations or other Limited Liability Companies (LLCs).

Unlike stockholders in a company, Limited liability company are not taxed as a separate legal entity. Instead, all profits and losses are transfer to the business to each member or owner of the Limited Liability Company (LLC). Limited Liability company (LLC) members report earnings and loss to federal tax department, like the owners or members of a partnership would.

Forming an Limited Liability Company (LLC)

While each state has slight variations to making an LLC, they all follow to a number of stated common principles:

Decide a Business Name.

There are three rules that your Limited liability Company name must follow and these rules are as follows:

(1) It has to be dissimilar from an existing Limited Liability Company (LLC) in your state,

(2) it must show that it's an LLC and

(3) it must not contain words restricted by the required authority.

Your business or company name is automatically registered with the relevant authority or department when you register your entity or business, then you do not have to go through a separate process.

File the Articles of Organization with the relevant authority

This is a simple document that legitimizes your Limited Liability Company (LLC) and includes relevant information such as your name, address of the registered office, and the names of its supporters. On the other hand, other states or provinces may require that you file with a different office, as the State Corporation Commission (SCC), the Department of Commerce and Consumer Affairs of the Department of Consumer and Supervisory Affairs, or the Division of Corporations and Commercial Code. Note: there may be a registration fee .

Create an Operating Agreement.

Mostly states do not require operative agreements. But an operating agreement is extremely important for multi member limited liability Company because it structures your LLC's funds and business, and provides rules and regulations for the operation. . Operating agreement usually includes rate of interest, and the distribution of profits and losses, and User rights and responsibilities and other provisions

License and a permit

When you registered your business and you have license and a permit to start or run a new business.

LLC Taxes

LLC is not a separate tax entity or company in the eye of law, so the business or income of the entity itself is not taxed by the authorities. All the income taxes are passed on to the Limited Liability Company (LLC's) members and are paid through their individual income tax.

The central or federal government does not recognize the LLC as a business entity for tax purposes, all LLCs must file as a partnership, corporation or sole proprietorship tax return

These are the tax forms depending on your categorization:

Single-member Limited liability Company (LLC) files Form like a sole proprietor or sole trader.

Partners in a Limited Liability Company (LLC) file a Form as a partnership tax return like owners or members in a conventional partnership business.

A corporation LLC files Form, as a corporation income tax return.

Advantages of an LLC

Limited Liability.

The members are safe from private liability for business or company decisions or actions of the Limited Liability Company (LLC). This shows that if LLC incurs debt, the personal assets of the members are usually exempted. This is related to the liability shield granted to shareholders or owners of a corporation or company. Generally speaking Limited liability means "limited" liability – members or share holders are not necessarily safe from illegal acts, with their employees.

Less Recordkeeping.

The greatest advantages of LLC operating company are there is comparatively less registration, documentation and paperwork and there are smaller or manageable start-up costs and investment.

Sharing of Profits.

LLCs can choose different ways to distribute earnings. Unlike a common partnership where the divided is 50/50, LLC have much more flexibility

No Minutes:

Every Corporation is compulsory to have formal minutes of meeting, and record purpose. But the Limited Liability Company (LLC) business or ownership structure requires no corporate minutes or resolutions and is easier and comparatively simpler to manage.

Disadvantages of an LLC

Limited Life.

Organizations can live forever, although a LLC is dissolved or liquefied when a member or owner in the partnership dies or suffers bankruptcy

Payment of Self-Employment Taxes.

Every members or owners of a Limited Liability Company (LLC) are considered self-employed individual and must pay the self-employment tax contributions of their income to the government. The entire net profits of the Limited Liability Company (LLC) are subject to this kind of tax.

Going public LLC

Every Business or corporation plans to take their company or business to the general public, or else issuing employee shares in the near future, but the Limited Liability Company (LLC) is not a going public.