For those who do not know what an LLC is, here is a brief description. LLC is a business structure that allows your company to enjoy legal responsibility like those of a corporation while avoiding annual reports, share distributions, bylaws, and other necessities when setting up a company.
Forming an LLC is helpful especially to fledgling businesses. It merges control and tax advantages of a partnership while having the advantage of limited accountability. LLC members are also protected from liability for business debts or claims. An LLC is more flexible than a corporation because owners can be individuals, trusts, partnerships, corporations and non-resident aliens. Plus maintenance is easy; LLC has less formalities and easier than running a corporation.
Differences of forming an LLC vs. Incorporation
Corporations are owned via share of ownership or stocks that are distributed to stockholders. An LLC, like partnerships, is simply owned by the members or the managers of the company.
Unlike an LLC, corporations require holding annual meetings and keeping written minutes. There is less paperwork in LLC because they do not have those requirements.
A corporation must pay taxes for their profits at the corporate tax rate. An LLC on the other hand is a "pass-through" tax entity. Meaning the profits or losses produced by the business will appear on the personal income tax return of the owners. Double taxation of paying corporate tax and personal income tax are therefore avoided.
What to expect after filing an LLC
Once you have decided to file for an LLC, you will receive two articles with a CD explaining the documents. The two articles are the Articles of Organization and the operating agreement. They will come along with the corporate or LLC kit.
The Articles of Organization formalizes your existence under state law. Once you have filed this, you have a legitimate business up and running.
This document spells out the name, purpose, incorporators, amount and types of stock which may be issued and any other special characteristics of the business entity. The Operating Agreement on the other hand, contains the written rules for conduct of the LLC. These include meetings, elections of a board of directors and officers, notices, types and duties of officers, and other standard protocol.
You will also have a registered agent who can acknowledge official documents on your behalf. Examples of the documents you'll be receiving are tax notices, annual reports and legal-process documents such as summons, etc.
The last steps include filing for an Article of Amendment to reflect the changing of your company from a corporation to an LLC. You also need to file an Initial or Annual Report. Business filing experts can help process necessary changes in your business.
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By The People in Fairfield can help you with the paperwork when forming an llc. We try to make each process as simple and fast as possible, as well as affordable. Our fees are a fraction of the cost that you would pay at an attorney’s office. Please call or stop in for more information. There is no cost or obligation to stop in and have an initial consultation with us.