Forming an LLC - Affordable, Easy Business Structure
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Entrepreneurs know that start-ups need to keep a tight rein on their budgets. That's why forming an LLC, a limited liability company, has become one of the most popular ways to start a business.
Available in all 50 states and the District of Columbia, an LLC combines the best attributes of a partnership and a corporation. As a recognized legal entity, an LLC protects the personal assets of its owners, also called members, just like a corporation. An LLC also protects its owners from "double taxation," because it allows business profits to "pass through" to the owners' personal taxation, like a partnership or sole proprietorship.
The beauty of an LLC for small businesses especially is that it protects the owner's personal assets from being taken for debts related to the company. At the same time, an LLC offers a "pass-through" tax option, where the profits accrue against the owners' personal income like a sole proprietorship. This avoids the hazard of "double taxation" that can occur with corporations, where the corporation is taxed, and then the shareholders dividends are also taxed.
Some states, such as Delaware and Nevada, are quite friendly to business and welcome LLCs to form in their state. This option is available for businesses that don't plan to do business in the owners' state of residence, especially if it has high personal income taxes or high filing fees. For instance, California charges an $800 fee to form an LLC there.
Forming an LLC involves several steps, but they're simple. Attorneys often offer legal service packages that will help a business create its LLC for as little as $150. This often includes searching state records for a unique business name that will include the designation "LLC" or "Limited Liability Company" at the end.
As mentioned earlier, forming an LLC requires paying a filing fee. Although not always required by a state, it's also a good idea to set up an "operating agreement" for your LLC. The operating agreement will spell out what the owners' responsibilities are for running the business, and what rights they have in regard to its operation and possible future sale.
The last steps in creating an LLC are to print a legal notice announcing your business name and LLC status and to obtain all necessary permits and licenses from your city, county and state.
Even in a state with high filing fees, an LLC often can be formed for less than $1,000, making it an economical choice for a start-up business.
Article Source: Articlelogy.com
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