What Is An
But members of LLCs only enjoy protection from claims on their personal assets such as their bank accounts, investment accounts, retirement, and real estate to the extent that the
LLCs are chartered by the Secretaries of State of the 50 states, as well as Puerto Rico, Guam, American Samoa, and the District of Columbia. Each charter establishes protection and responsibilities for the members of the
LLCs offer many of the benefits of incorporation, but under simpler rules and at a much lower cost.
Table of Contents
- What Is An LLC?
- What are the pros and cons of an LLC?
- At what point do I need an LLC?
- Where is the best state to form an LLC?
- What does it cost to form an LLC?
- What do I need to start an LLC?
- What does an LLC protect?
- What is the difference between LLC and Inc?
- What is the difference between DBA and LLC?
- What is the difference between an LLC and an S-corp?
- What is a Series LLC?
- What is a single-member LLC?
- What is a member of an LLC?
- What is a registered agent for an LLC?
- What is a statutory agent for an LLC? What is a resident agent for an LLC?
- What are the bylaws for an LLC?
- What is an operating agreement for an LLC?
- What tax form does an LLC file?
- What is an LLC partnership? Is it the same as an LLP?
- What is an annual report for an LLC?
- What is the due date for LLC tax returns?
- If I file personal bankruptcy, what happens to my LLC?
- What is the difference between a holding company LLC and an operating company LLC?
- What is a member-managed LLC?
- What is a manager-managed LLC?
- What is an executor of an LLC?
- Who is an authorized member of an LLC?
- Who is an authorized representative of an LLC?
- What do you call the owner of an LLC?
- What happens to assets when an LLC is dissolved?
- What are the tax advantages of an LLC?
- What is Asset Acceptance LLC?
- What do I need to open a bank account for my LLC?
What are the pros and cons of an
There is no easier way to separate and protect personal assets than forming an
On the other hand, it is possible to go wrong with an
Signing a contract with your legal name and without referring to your
At what point do I need an
Protection from liability is always better sooner than later. Before your first business transaction, before you file for your EIN or open a bank account, you should have filed your Articles of Formation for your
Where is the best state to form an
In general, the best state for forming your
What does it cost to form an
Different states charge different fees for forming and maintaining LLCs. It only costs $50 to form an
Every state will require you to maintain a registered agent. Registered agent service for your first year may be included in the fees of a company you use to help you form your
After your first year, a registered agent will cost $50-$500 yearly unless you can be your own registered agent. This means being available at reasonable business hours every business day to receive mail and court documents. Accounting fees can range from $500 to $2000 per year, depending on the number and complexity of your tax returns.
It’s not unusual for the new members of an
What do I need to start an
Once you have a business idea, a business plan, and a good idea of where you will find capital for your venture, the next step in forming an
Any name you choose must be followed by the terms “
Next, you will need to file your Articles of Organization with your Secretary of State and pay the required fees. When your state forms your
If you are planning to run your business under any name other than the name of your
What does an
- Signing a personal guarantee to get a loan.
- Offering your own property as collateral for a loan.
- Signing a contract in your own name rather than signing it as an officer of your
LLC. You must sign contracts in the name of your LLCto get personal protection against court judgments.
- Using credit cards or home equity loans to fund your business.
- Fraud, misrepresentation, or sloppy record-keeping.
What is the difference between
LLC and Inc?
These are abbreviations for two different types of businesses. An
There are differences in the vocabulary used to describe LLCs and corporations. An
It is extremely useful in the operation of the business but not required by the state.) The activities of a corporation are governed by its bylaws, which are required by the state. Owners of an
Corporations protect the personal assets of their shareholders. Corporations can raise money by selling stock.
LLCs that elect tax treatment as if they were a C corporation or an S corporation are still LLCs. Only tax treatment changes.
What is the difference between DBA and
DBA is short for “doing business as.” A DBA is a fictitious name under which a company is operating. In most situations, any name other than the owner’s legal name is a fictitious name that requires DBA registration.
For instance, Olive Oyl could operate a hamburger shop under the fictitious name Olive Oyl’s Hamburger Shop. To use this name, she would have to file a DBA. If she put up a sign that just read “Olive Oyl,” she would not need a DBA.
However, LLCs usually “do business as” a fictitious name. Once the
What is the difference between an
LLC and an S-corp?
Since the beginning of 2018, LLCs have been able to elect to be taxed as if they were Subchapter S corporations. For federal tax purposes, there may be very few or no differences at all if the member or members of an
If the members of the
This doesn’t mean that every S corp is an
IRS requirements for treating a corporation under Subchapter S are having fewer than 100 owners and one class of stock.
For differences between LLCs and corporations in general, please see “What is the difference between
What is a Series
A series limited liability company, also known as a series
Each series acts as a separate
Each series can own real and personal property. It can sue and be sued. But it is not necessary to set up a new
Most states do not permit the formation of series LLCs. Delaware was the first state authorize series LLCs, followed by Illinois, Iowa, Nevada, Oklahoma, Tennessee, Texas, Utah, and Puerto Rico. Some other states, such as California, do not allow the formation of series LLCs in their own state but permit out-of-state or “foreign” series LLCs to operate with appropriate registration.
In most states, articles of formation for LLCs must include a statement that authorizes it to form a series
What is a single-member
One way to think of a single-member
It is no longer true that all the income and expenses from a single-member
What is a member of an
A member is an owner of an
What is a registered agent for an
LLCs must have a registered agent at a physical address to receive business communications and legal process during business hours. The owner of an
What is a statutory agent for an
LLC? What is a resident agent for an LLC?
These are additional terms for a registered agent.
What are the bylaws for an
LLCs have “operating agreements” instead of “bylaws,” which are more frequently associated with corporations. For further information about operating agreements, please see below.
What is an operating agreement for an
The operating agreement for an
Most operating agreements will have six sections:
- Management and Voting
- Capital Contributions
- Membership Changes
Even a Single-Member
What tax form does an
Under the old rules, a Single Member
These are still the rules for LLCs whose owners do not opt for tax treatment as if they were C or S corporations. An
What is an
LLC partnership? Is it the same as an LLP?
In most partnerships, each partner is liable for the debts and court judgments incurred by any other partner. In a limited liability partnership (LLP), each partner is responsible only for the debts and court judgments that partner incurs.
LLPs are popular for organizing partnerships of doctors, accountants, attorneys, and accountants. If one doctor in an LLP loses a court case and must pay a judgment for malpractice, for instance, the other doctors in the partnership will not be exposed to her liability. Some states only permit LLPs for groups of partners providing professional services. Others permit LLPs for other kinds of business activities but require the members to organize as an
What is an annual report for an
Annual reports keep the state up to date on the names and addresses of member(s) and the registered agent. The annual report will confirm important numbers for the business, such as its EIN and the numbers of any state licenses, confirm its purpose, and identify any managers with the authority to make contracts for
Not every state requires an annual report. Failure to file annual reports may result in loss of liability protection for the owners/members of the
What is the due date for
LLC tax returns?
Single-member LLCs that have not elected to be taxed under rules in Subchapter S or Subchapter C of the Internal Revenue Code are “disregarded entities” for federal tax purposes. They do not file tax returns. Usually, the owner must report revenues and expenses on Schedule C attached to Form 1040 by April 15.
Multiple-member LLCs that have not filed elections to be taxed under rules in Subchapters S or C file partnership returns on Form 1065 by March 15. And LLCs that have elected to be treated as corporations for purposes of federal income tax file their returns before the fifteenth day of the third month after the end of their fiscal year.
If I file personal bankruptcy, what happens to my
When you file personal bankruptcy, your “estate” or your personal assets include your
Even if you have been careful to keep your business and personal finances separate, the bankruptcy trustee can take over your interest in the business and vote to sell it. Personal bankruptcy can cause serious problems for business partners, even if you have followed all the rules for LLCs.
What is the difference between a holding company
LLC and an operating company LLC?
LLCs that are set up to be holding companies perform no operations other than owning another company or companies, called operating companies. Operating companies are where business activities occur. Setting up a holding company is ideal for owners of multiple businesses who want an additional layer of protection from liabilities from the individual companies they operate.
Holding companies typically have greater access to credit and operating capital than their operating companies. They acquire greater name recognition and goodwill. There are situations in which owners of a holding company can defer taxes by having their operating companies distribute income to the holding company rather than directly to owners.
What is a member-managed
In a member-managed
What is a manager-managed
In a manager-managed
In most states, the operating agreement must specify whether the company is member-managed or manager-managed. This allows vendors and lenders will know who is responsible for paying them.
What is an executor of an
The executor of an
Who is an authorized member of an
An authorized member is an owner of the
Who is an authorized representative of an
An authorized representative of an
What do you call the owner of an
Owners of LLCs are referred to as “members” of their
What happens to assets when an
LLC is dissolved?
The dissolution of assets is determined by the Operating Agreement that every
What are the tax advantages of an
All members (owners) of LLCs can take advantage of a deduction of up to 20 percent of their qualified business income by attaching a Form 8995 to their federal income tax returns.
What is Asset Acceptance
“Asset acceptance” is not a kind of
What do I need to open a bank account for my
You can open a bank account for your