How to Form an LLC
March 10, 2010-Atlanta, GA--To many business owners it may make sense to form an LLC, or limited Liability Company. An LLC is a flexible type of business that combines parts of partnership and corporate structures. By incorporating a business the owners can protect themselves with limited liability. The process of forming an LLC can range from simple and hassle free to difficult and a pain, therefore it is important to research local (state) as well as national laws, routes to incorporation, and budgets before undertaking this endeavor.
A business owner should consider the pros and cons of incorporating their business, some of which include:
- Limited liability to the owners.
- Lowered amounts of paperwork when compared to a corporation.
- Check-the-box taxation.
- LLCs can be set up with only one person involved in some states.
- Cost of forming an LLC.
- An LLC may be an unfamiliar management structure.
- Creditors requiring new LLCs to guarantee loans (members may be personally liable)
Each state offers business owners the opportunity to form an LLC, but the rules and restrictions vary in each state, which can create some confusion about how to form an LLC. But one of the first steps of creating an LLC is to check with the local Secretary of State or Department of Commerce to ensure the availability of the proposed LLC name. Failure to do so may mean infringing on another company’s copyrighted name.
Once the owners have checked that the name does not violate any copyrights the next step to form an LLC is to file paperwork to incorporate their business, or form an LLC. This process can be difficult but there are companies that will take care of the hassle online. It should be noted however that online companies are trying to make money; therefore it is important to investigate the company’s policies to ensure legitimacy and a fair price. Most of the online companies are competitively priced, although there are differences. However, the level of customer service varies significantly and this factor should be considered heavily. Since you are sharing sensitive information and turning over an important step in your new business formation, it is important to select a company that will provide you with individual service. The last thing you want is a call center type of environment.
Only after the LLC formation is complete should you obtain an Employer Identification Number (EIN), also known as a Federal Tax number. This number is required by government to start any legal business. The same company that forms your LLC should help you with this, making the process easier, faster and more convenient than filling out traditional paper based documents in a government agency building.
Additionally, you will need to prepare Articles of Organization. You may decide to do this yourself, or you could have the formation company handle this for you, but be certain you understand what this is and how it can affect your new company.
In the end forming an LLC can enhance a company immensely while at the same time protecting its owners. The decision to form an LLC is an important one in the growth cycle of a business and should not be taken lightly or without the proper research.
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