Developing a Limited Liability Company – An entrepreneur’s guide through the process
Are you planning to set up your own business? If yes, then you need to know that starting a business has lots of probable risks associated with it. Establishing a corporation during the unexpected economic times may turn out to be disadvantageous. This is particularly true if you are starting your own business for the first time. However, if you are looking for an alternative that is less official but is as flexible as a corporation, forming an LLC may seem to be your best option.
LLC stands for Limited Liability Company. It is a business model that merges the limited liability characteristic of a corporation and combines with the operational flexibility of a partnership. It is a model that is growing in popularity with small businesses across the country. In spite of its amalgamation of the two essential features of a partnership and combination, it has its own kind of business unit.
LLC, being introduced in the year 1977 makes the business model somewhat new to the United States. However, it dates back further and comes with different rules in the other parts of the world. In the United States, the “partners” of an LLC are known as “members.” The members gain profit from incorporation while preserving a small business setup. Similar to a proprietorship or partnership, the members report profits and losses on their income tax returns. Like a corporation, the members get protection from personal liability, which means that they are not responsible for any company debts.
One of the main things about the development of an LLC is the fact that if the company meets any legal trouble, only the assets of the company are at risk. The creditors cannot go behind any members and their personal possessions. Thus, this is one of the reasons why many people choose to form an LLC.
General principles when developing an LLC
Though every state has its own set of rules, here are discussed some general principles when developing an LLC.
Select a business name – While talking about business name, the name of your company must be separate from the other businesses in the state. It should have a clear label of an LLC. There are some states that limit the use of some words such as insurance and bank. So, try not to use such words in your business name.
Operating agreement – The operating agreement is the written policy of conduct for your LLC. It acts as a binding agreement among the members and requires official amendment. Though it is not mandatory in most of the states, the general suggestion is to plan one if you are to form an LLC.
Filing of the articles of organization – The filing of the articles of organization is a complete summary of your business. It consists of the necessary information like the name of your business, its address and members. It also documents the stocks that your company may issue and legitimizes the procedure of your business.
Permits and licenses – Rules and regulations may differ as per the industry and by the state. Thus, you may seek advice from a knowledgeable document filing company when preparing and filing the necessary documents.
You need to know that operational easiness is one of the greatest benefits of an LLC. Thus, you have the choice to file paperwork on your own or appoint a third party who will do the work for you. An external group may help you save your precious time, energy, and resources. Apart from their capability in filing documents, they may also help you with the answers of all your questions during the setup.
Author Bio: This article has been contributed by Billy Patterson. He is associated with Oak View Law Group as a contributory financial writer. He likes to keep updating himself regarding recent developments in the finance sector. He has written many articles on debt management, debt solutions, bankruptcy etc.