Setting Up an LLC - The Benefits and Steps of a Limited Liability Company

A limited liability company (which is commonly abbreviated as LLC) offers limited liability to its owners as a legal form of business company in the United States. Many small business owners are drawn to this type of business formation because it offers limited liability for the actions and debts of the company. This type of business formation excludes personal liability from the general debts and other obligations of the company and limits the liability of the owners to the extent of their equity. An LLC has characteristics of both a partnership and corporation; the primary partnership characteristic is the availability of pass-through income taxation while the primary corporate characteristic is limited liability.

Many entrepreneurs choose to setup an LLC for tax reasons. LLCs avoid "double taxation" because the income of the LLC itself is not taxed at the company level. Instead, taxes on profits and deductions of losses are computed at the individual level on the personal tax return of each LLC member (owner). LLC owners can elect for the IRS to tax the LLC as a sole proprietorship, partnership, C Corporation, or S Corporation. Owners make this election through the IRS after the company forms with the state.

After setting up an LLC, the bottom-line profit of the business is not considered to be earned income to the members, and therefore is not subject to self-employment tax. But it is still important to consider that the managing member's share of the overall profit of the LLC is considered earned income, and is subject to self-employment tax.

Members of an LLC are compensated using either guaranteed payments or distributions of profit. Guaranteed payments represent earned income to the members, which qualifies them to enjoy the benefits of tax-favored fringe benefits. A distribution of profit allows each member to pay themselves by merely writing checks. However, as a member of an LLC, you are not allowed to pay yourself wages.

Another important perk of setting up an LLC is that the managing member of an LLC can deduct 100 percent of the health insurance premiums he pays, up to the extent of their pro-rata share of the LLC's net profit.

The basic steps to setting up an LLC are fairly simple:

Step 1: Find a copy of the LLC Articles of Organization Form for your state. This is usually located at the Secretary of State's office. It is also a good idea to check there are any rules concerning business names in your state.

Step 2: Choose a name for your business. Almost any name will work so long as it is not the same or deceptively similar to a name being used by another entity that is filed with the State Filing Office which is usually the Secretary of State's Office. The name must end with the words Limited Liability Company or an abbreviation such as LLC or L.L.C. The ending such as LLC or Inc is not considered part of the name when searching for availability.

Step 3: Complete and File the Articles of Organization form with the State Filing Office. The State Filing Office where you turn in the form is usually the Secretary of State where you are required to pay a filing fee. The Articles of Organization form is a relatively simple document that includes the name of your business, its purpose, office address, the registered agent who will receive legal documents, and the names of each initial member of your proposed LLC. A registered agent is simply a person or incorporated company who can accept service of legal papers if your company is sued or the person who can receive mail from the State Filing Office. You can act as your own registered agent, however, the address you use must be a street address and not a P.O. Box. The address is important to make sure you receive papers that are served or sent to your company.

Step 4: Submit a notice to your local newspaper for publishing. This step is sometimes required by your state, you may want to check to make sure. Some states even require this step to be done before filing your Articles of Organization form. This notice should detail your intention to setup an LLC.

Step 5: Prepare and Sign an Operating Agreement. This is not required by the state but is a very important step in maintaining your liability protection and preventing disagreements between the members. The Operating Agreement is an essential document which sets forth the rights, duties and obligations of each member of the LLC. It also usually sets the ownership percentages between the members, the division of profits and the distribution of income. This document can also strengthen your liability protection by demonstrating that you have completed the organization of the company and are in compliance with the process.

The State Filing Office usually does not provide Operating Agreements, this will be something that you have to come up with. Many people use online services such as settingupllc.com, and other people go further and hire attorneys which can be much more expensive.

Step 6: Obtain an Employer ID Number (EIN) from the IRS. As a separate legal entity, your LLC requires its own federal tax identification number from the IRS. This can sometimes be avoided if an LLC is owned by only one person, in which case the person has the option of reporting taxes on his own social security number. To get the Employer ID Number you can acquire from SS-4 from most post offices and then file it with the IRS.

Step 7: Setup a Separate Bank Account for the LLC. A separate legal entity requires a separate bank account. It is important that you do not co-mingle your funds between business and personal bank accounts. The courts will look at this if you were to ever get sued.

Step 8: Document Ownership Interest Percentages of the LLC. To avoid disputes and ownership conflicts in the future, it is important to assign ownership percentages when the company is first formed. This step is not necessarily required, but it would be very wise.

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Adult Guardianship

Many families struggle with how to manage the finances, health care and other personal matters of adults who are unable to care for themselves. You may decide to pursue an adult guardianship if an adult is mentally or physically unable to make his or her own decisions and does not have a living will and power of attorney that provide a competent person to make those judgments.

Probate and Administrative Process, Know Your Rights

Probate is the system in which the court's system's method of processing the estates of a dead person. It is a legal document that enables the administration of the estate of the deceased. It allows for the resolving of claims and distribution of the deceased's will. Any grievances surrounding a deceased person's estate are filed in the probate court also known as the surrogate court. Once probated, the will becomes a legal instrument that can be enforced by the executor.

Administration process

Administration process of an estate on the other hand is the process by which the deceased person's assets are collected, maintained and distributed. An estate administrator sees to the proper administration of the will.

The Probate process

The probate process begins after the death of a person. An interested person files an application to administer the estate; a fiduciary is then appointed who is to administer the estate and at times may be required to pay a bond to safeguard and to insure the estate. Creditors are notified and legal notices published. There may be filed a petition to appoint a personal representative may need to be filed and letters of administration obtained. All these processes must be done in accordance with the limitation clause.

Property that avoids probate

Property that passes to another person contractually upon the death of a person does not enter probate for example a jointly owned property with rights of survivorship. Property held in a revocable or irrevocable trust that was created when the grantor's was still alive does not also enter probate. In most of these cases the property is distributed privately and without many issues thus no court action is required.

What happens in the probate and administrative process?

After a probate case has been filed in court, an inventory is entered and the deceased's property collected. The debts and taxes are paid first then the remaining property distributed to the beneficiaries. The probate and administrative process may be challenged at any time as a whole or part of it. The issues that arise during such hearings include will contests and paternity issues and these have to be solved before the matter is decided.

The need for the appointment of an administrator arises where the deceased left no will, some assets are not disposed of by the will, in cases where there is a will however, the case goes to probate directly. The estate administrators act like will executors but where the will does not state how to distribute of property, they follow the laid down laws.

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Considerations in Filing for an LLC

Setting up an LLC and other states has become a popular option for many small business owners because of the many benefits it offers. A limited liability company puts together the advantages of a sole proprietorship, a partnership, and a corporation all in one business entity. This means compete control, tax benefits, and limited liability. The interest in LLCs continues to grow as more and more business owners are able to realize its advantages over other business types.

Before starting an LLC, there are some considerations that should be kept in mind. Taking note of these considerations will ensure that the processing of its registration with the appropriate government agencies will go faster and smoother. When the paperwork is completed properly, there will be no questions as to the LLC's legality.

First, the members filing for LLC should decide on the name of the business. This should meet the standards in LLC names set by the state government. To know the availability and aptness of the name, the business name database can be utilized for verification. Also, the name for an LLC can be reserved for four months by filing an application as well.

The next step is submitting the LLC's Articles of Organization. These articles should include all the necessary information about the LLC such as the name and address of LLC, its registered agent, and its duration. Also, how the LLC will be managed and who will manage the LLC should be stated in the Articles of Organization. Under the law, these are all filed with the office of the Secretary of State through mail.

The Operating Agreement should be processed after the filing of the Articles of Organization. Though this is not required by the state's government, it is still highly advisable. This is essential to define each member's responsibilities and liabilities. With Operating Agreement, the members can be protected from being personally liable if ever the business becomes bankrupt. Aside from the statement of responsibilities and liabilities, other information can be included as well. This includes the business nature, concept, and mission statement.

Lastly, business permits and licenses should be acquired. These vary depending on state laws. The business licenses that need to be obtained depend on the nature of the business and its location. Aside from that, the LLC businesses are all required to submit annual reports. This is also submitted to the Secretary of State on the designated date and can be done through mail or online filing. Knowing about all these requirements will help business owners keep track of their filing schedules to ensure that they are always compliant with all the government's documentation and reportorial requirements.

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What Is Estate Planning and Is It Useful?

Estate planning creates a plan for the distribution of your assets after you die. Most of us are familiar with a common product of estate planning: the will. Featured in TV shows and in everyday conversations, sometimes, the discussion surrounding this popular topic is not favorable.

We've seen people contesting wills, challenging their family members, feeling cheated by the administrators of wills and by the law and we've seen them arguing through lawyers about what wills mean how they should be executed. Other forms of estate planning exist to reduce the amount of conflict surrounding decisions.

Health care decisions can be included in estate planning; a health care proxy exists so that a chosen person can act out the desires of an incapacitated person still under medical care.

When it comes to the distribution of their wealth and medical decisions, multiple measures exist to enable the dead and the severely injured a means of executing their own desires. However, even in the case where no formal plans are made, heirs do receive some forethought in terms of the law.

The law of intestacy communicates that even if no measures are taken to distribute assets by a deceased party, those assets will still go to the deceased person's heirs. The law of intestacy has the most staying power in situations where it is least likely to be challenged by those wanting more. For insurance, according to Attorney Sean W. Scott of Virtual Law Office, this law works with a small number of assets and a with a small number of heirs.

In each of these cases, one can imagine there would be less conflict involved. With less to fight over, fewer fights can ensue. The same is likely true with fewer beneficiaries; as heirs likely know one another well when smaller in number, less family tension can arise. Fewer instances of certain heirs feeling more worthy than others to certain possessions may exist. The likelihood that an individual or set of siblings would usurp others' belongings may be reduced. And general confusion arising from miscommunication and a lack of cemented durable relationships may possibly decrease with a smaller set of heirs. None of these suggestions are set in stone, yet corresponding data would be a more than interesting dinner topic.

Scott emphasizes the financial advantages of estate planning, sharing that taking certain precautions can save money for heirs receiving portions of estates. As lawyers stay on the job, working to settle issues between family members or between the state and family members, their tabs continue running. Evaluating the multiple options may familiarize you with the best decisions for your situation, reducing stress and increasing savings for your loved ones after you pass.

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Deeds - Some Ways To Make Changes - By the People

Rene at By the People talks about Deeds of trust and how they can help people make the necessary changes to their title for a number of different reasons. Call 707-428-9871 with any questions, and visit the website at http://www.bythepeopleca.com

Advance Healthcare Directives - Be Sure to Write Your Living Will

With modern medical technology advancements, it is becoming more and more important to consider writing an advanced healthcare directive. There are several kinds of advanced healthcare directives. A living will is one form of an advanced healthcare directive. It is a document that specifies what you want to be done medically if you are no longer capable of making decisions for yourself. A medical power of attorney or healthcare proxy is another form that appoints a specific person to make decisions for you if you are incapacitated. It is advised that a person have both documents prepared and in place long before they will ever be needed.

With today's advancement in medical care, many people are left confined to nursing homes. Many elderly are in a vegetative state, fed through feeding tubes while their bodies slowly die. The emotional and financial burden the families of these patients experience is overwhelming. Lives are prolonged but there is no real quality of life. An advanced directive can prevent this from happening to those you love.

The living will was first proposed by Luis Kutner in 1969. His purpose was to make sure the living were able to make their wishes known when they were no longer able to speak for themselves. The living will gives direction to medical professionals about what procedures a person wants and doesn't want. It can forbid the use of medical equipment used to sustain life or direct it be discontinued when it only prolongs death. It can be general or specific depending on the wishes of the person writing it.

Advanced directives should be regularly updated to make sure they cover current medical technology. As advancements are made, changes need to be made to reflect that advancement. A living will that is current is more likely to be acknowledged and followed.

It is advised that a living will be combined with a healthcare proxy to assure your wishes are followed. No document can fully cover all the circumstances that might occur. Having a person on the scene making immediate decisions is important. By designating a person in advance to make decisions, you can be reassured that no decisions are made that might conflict with your desires.

The comfort and peace of mind an advanced healthcare directive gives is invaluable. Knowing you will not be a burden to your family allows you to calmly live knowing any necessary medical decisions will be made by someone you trust.

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What You Should Know About Annulment

An annulment is a declaration by the circuit court that there is a defect in the marriage such that the marriage is void. Contrary to popular belief, you cannot have your marriage annulled because you did not consummate the union or because you changed your mind shortly after the ceremony. To qualify for an annulment there must be a defect which goes to the heart of the marriage. If the marriage is valid, the only recourse is to file for divorce. A divorce dissolves a valid marriage, whereas an annulment recognizes and declares a marriage to be so defective as to be non-existent.

A marriage may be void or voidable. The grounds for the annulment determine whether the marriage is void or voidable.

Void Marriages~The following marriages are void from the start and consequently not recognized at law: 1) marriage to someone who is already married and 2) marriage to a close relative. Under these circumstances, the marriage is void from the start. Either party may petition the court for an annulment. There is no limitation as to when the suit may be filed. It is important to note that if one party was married to someone else at the time of the marriage, the subsequent death of the other spouse or the subsequent divorce from that spouse will not validate the marriage. The only way to validate the marriage in such a case is to remarry after the problem has been resolved.

Voidable Marriages~A voidable marriage is legally valid unless one of the spouses files for an annulment. Marriages are voidable, if one of the spouses: 1) was physically or mentally incompetent at the time of the marriage, 2) consented to the marriage under fraud or duress, 3) was a felon or prostitute without the other's knowledge, 4) was impotent, 5) was pregnant by another man without the other spouse's knowledge, or 6) fathered a child by another woman within 10 months of the marriage without the other spouse's knowledge. Please note that it is the "wronged" spouse who has the grounds for annulment and not the spouse who perpetrated the fraud.

Unlike void marriage, courts will not grant an annulment of a voidable marriage if the spouses continue to cohabit or live together as husband and wife after discovery and knowledge of the circumstances constituting grounds for the annulment. If there is cohabitation with knowledge of the circumstances or if you have lived with your spouse for two years or more before filing a petition for annulment, you will be required to file for a divorce instead of an annulment. We had the unpleasant task of telling a man who had been married five years that although he had grounds to annul his voidable marriage, he waited too long to file for an annulment. He had to file for divorce.

The Procedure~The procedure for an annulment is the same as for a divorce. The only procedural difference is the grounds for the lawsuit. However, the relief available in an annulment is different than in a divorce.

The Relief~While the court may make a temporary order for spousal support and attorney's fees, during the pendency of the annulment suit, the court has no authority to grant post-annulment "spousal support" or equitable division of property and debts. If there are children, the court may rule on custody and child support, even if the marriage is void.

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Can Anyone Else Revoke a Power of Attorney I Have Granted?

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Estate Planning : How are Trusts Taxed?

In estate law, trusts are taxed differently depending on whether they are revocable or irrevocable trusts. Learn how a trust is taxed from an estate planning and probate lawyer in this free video on estate law.