Should I form a Limited Liability Company?

Should I form a Limited Liability Company?

A Limited Liability Company can be best described as a hybrid between a corporation and a partnership. It provides easy management and “pass-through” taxation (profits and losses are added to the owner(s) personal tax returns) like a Sole Proprietorship/Partnership, with the liability protection of a Corporation. It’s a relatively new form of business created in 1977 in Wyoming and now recognized in all 50 States and D.C.

Like a corporation, it is a separate legal entity; unlike a corporation, there is no stock and there are fewer formalities. The owners of an LLC are called “Members” instead of “Shareholders”. So in essence, it’s a like a corporation, with less complicated taxation and stock formalities.

The heart of a Limited Liability Company is known as the “Operating Agreement”. This document sets the rules for operating the company and can be modified as the business grows and changes. Our LLC Formation Service includes a fully personalized Operating Agreement (as well as an editable copy in Microsoft Word format) for you to modify as the company changes.

Operating an LLC is less formal than a corporation, usually only requiring an Annual Members’ Meeting and Members’ agreeing to changes of the Operating Agreement and other major company decisions.

PROS: Provides the liability protection of a corporation without the corporate formalities (Board meetings, Shareholder meetings, minutes, etc.) and extra levels of management (Shareholders, Directors, Officers). Taxed the same as a sole proprietorship (1 Member LLC) or partnership (2 or more Members).

CONS: Usually more expensive to form than a DBA, requires more paperwork and formal behavior. Can be hard to obtain for new construction companies because the bonding requirements are more difficult.

The Lowdown: The Entity of Choice for 1-5 person startups, has recently surpassed corporations in popularity. Easy management and limited compliance requirements have made the LLC the user-friendly solution for small business.

How to Get Started

You can form an LLC right now. Complete the contact form below and provide us with your top three LLC names. We’ll take care of the rest.