How To Form a Limited Liability Company?

Answer 1

Choosing a limited liability company (LLC) formation for your business is an important move that should be made using advice from your local LCC formation attorney for best results. An LCC is a type of enterprise organization that mixes good qualities of both a partnership and a corporation. It is a legally formed business structure that, in most of the United States, offers the protection of limited liability for its owners. It can be set up either for profit or as a non-profit business entity. Consultation with your attorney is a good step one to take, so that your business does get off the ground and in the right direction, without structural errors.

An LLC is not a corporation, even though it has some corporate benefits. It is a company that mixes characteristics of both a regular corporation and a partnership or a sole proprietorship. It also can be considered to be an unincorporated association. The LLC is a legal entity, and for tax purposes it is treated as a pass-through entity. Like a partnership, any income taxation liability is passed along through to the partners involved in the LLC.

Partners in an LLC need to know that their 'limited liability' does not totally protect them from being personally liable, and that courts can circumvent any corporate veil should fraud or misrepresentation be present. A specific operating agreement and bylaws will determine how the LLC is governed and gives partners much flexibility in decisions of how their LLC will be run.

If there is only one owner of the LLC, the owner will report any LLC income on their own Schedule C tax form. If there are multiple owners or members, it is treated for tax purposes like a partnership and all must file IRS Form 1065 when they receive their K-1 income or lass statement. No board of directors is required.

As another benefit to LLC formation, the entity can elect taxation as a corporation. It would be considered as a C corporation, or an S-Corporation. This brings some self-employment tax savings to members. As a corporation for taxation, the company income is taxed prior to distribution of dividends.

Some professional individuals will prefer to create a PLLC, or Professional Limited Liability Company in states where licensing in that profession is required by state laws, such as for doctors, architects, lawyers, et cetera.

Again, it is highly adviseable to use an LCC formation attorney to determine which particular form of an LLC is best for your company and organization for best results.