Creating a LLC

LLCCreating an LLC or limited liability company is one of the popular forms of business registration in the United States. Creating an LLC is possible to do without having to hire a lawyer although most experts advise that it is always in a company’s best interests to get good legal and financial advice before making any major business decision.

Like incorporation creating an LLC is primarily designed to separate the business and personal financial interests of the business owners. Unlike incorporation creating an LLC does not restrict a business from having any management or ownership structure that meets their particular business needs. There are neither requirements for shareholders nor any need to protect their rights or make annual reports to them on business operations or investment strategies. There is also no requirement for an annual general meeting of a limited liability company or to prepare reports and minutes from such a meeting. However it is recommended to maintain meetings and members and managers of the LLC for tax purposes.

Creating an LLC does have a few drawbacks however. They include having to pay the appropriate taxes and levies to register and there are some reporting requirements depending on the state in which the limited liability business is registered.

An LLC is not viewed by the powers that be as a separate entity from the owners of the business and therefore most revenue after expenses have been deducted is usually only taxed once. In a C-corporation this income is viewed to be of direct benefit to the interests and owners of the corporation, the shareholders, and is therefore subject to double taxation, at the corporate and personal levels if dividends are paid.

Creating an LLC does give many business owners a sense of comfort because they are not liable for any of the activities or debts or the responsibilities of the company beyond their ownership stake. If something goes terrible wrong then they will lose their investment in the LLC but they will not lose everything they own personally if they are operating under a limited liability form of business. For many small business owners this in itself is well worth the time, energy and money involved in creating an LLC or Corporation.

About Brian Davis

LLC expert author and advisor. Has advised thousands of entrepreneurs over the last 15 years on which business structure is right for them. Brian is not an attorney or tax professional. If you need tax or legal advice, seek the assistance of a local attorney or CPA.

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