If you are starting a business and thinking of forming an LLC, there are various factors to consider in order to make the right decision for your particular circumstances. Outlined below are some basic steps to getting your LLC set up.
What is an LLC?
An LLC is a relatively simple business structure. It has several advantages, such as pass-through taxes (the company does not need to file a corporate tax return. Owners report earnings on their personal tax returns, thereby avoiding double taxation), legal protection for the owners against company debts and obligations, and enhanced credibility over competitors that may not be incorporated.
There are some disadvantages to this type of business structure as well. For example, limited potential for growth because shares of stock cannot be issued in order to attract investors, not all states treat LLCs the same resulting in a lack of uniformity, and earnings may be subject to self-employment taxation.
How to Create an LLC
- Choose a state in which to form your LLC. This sounds straightforward, but may become more complex if you do business across state lines.
- Choose a business name that conforms with the laws of your state.
- Choose a registered agent who will receive and forward legal papers and official correspondence on your behalf.
- File your articles of organization (formal paperwork) with the state.
- Make an operating agreement for your LLC. This will outline the structure of ownership and the role of each member of the LLC.
- Get an Employer Identification Number so you can pay your taxes, open a bank account and hire employees.
- Obtain licenses and permits which allow you to do business in your state.
- Open a business bank account and establish accounting procedures, either in-house or out-sourced to a CPA firm.
If you are thinking of forming an LLC, contact H&H CPAs for more information about each step and what you need to do to make sure you have everything set up properly.