Things to consider when forming an LLC

March 26, 2014

Created under state law, an LLC affords the protections that keep you safe from personal liability. The benefit of this is that your business can receive the same limited liability protections a corporation receives, but it is an easier process to attain LLC status and an LLC offers the flexibility of a partnership. If you are thinking about forming an LLC, here are some considerations to bear in mind.

Decide whether an LLC is the right corporate structure for you.

Once you’ve decided to move ahead, you will be required to provide articles of organization to your secretary of state’s office. So, have member names and contact information ready. Depending on the requirements of the state, you may have to file with a different office. If you want, you can form an LLC as one individual.

Be aware that although you may seem to be cutting costs by forming an LLC, you may be required to pay certain annual fees and taxes in some states. Maintaining a record of business proceedings and formal meetings will help to ensure that your LLC status is protected. If you are a member of an LLC your net income is subject to self-employment taxes.

Rules for forming an LLC are different from state-to-state, and if you’d like, you can choose to incorporate out-of-state. For example, Many businesses choose to incorporate in Delaware for tax reasons. Some states may require that you draft an operating agreement in advance of filing for incorporation. Doing so can help protect company structure in the event that it is challenged in court. An operating agreement may include details such as member rights and responsibilities and ownership percentages.

A company that offers incorporation services can make it easier for you to form an LLC. If you’re looking to incorporate your business, knowing what needs to be done and preparing for it ahead of time can make this process smoother.