How to start a LLC (Personal Limited Liability Company) really depends on your situation and objectives. If you want to avoid paying taxes on your income or just want more flexibility in making business decisions, starting an LLC could be for you. But there are some important things you need to understand before you start an LLC. So read this article carefully and make sure you have all the facts about how to setup an llc.
Starting an LLC is not as simple as getting a business license. Before you can begin to register your new LLC, you'll need to register your original C corporation with the IRS. C corporations aren't taxed until they turn over tax returns. So, the longer your LLC is active the longer it will be subject to double taxation. So if you want to be treated like a corporation instead of a sole proprietorship, you'll have to register and pay taxes even if your business structure remains the same. In addition, you'll have to pay the corporate tax.
If you're a solo-professional worker, an LLC might not be a good idea. Solo professionals don't usually own lots of assets, so the paperwork involved in incorporating an LLC isn't worth it. Besides, most solo business owners will already have a C corporation or other business structure set up. The time and money it takes to incorporate an LLC is more than worth the difference.
How to Start an LLC - Two Types of Legally Separate Businesses
Forming an LLC is pretty straightforward. You'll need to file an article of organization form with your county clerk. An article of organization must contain the names of all the members of the LLC, their address and the date of each annual meeting. You also have to provide information about your business, including how long it has been in operation and the purpose of the LLC. All these pieces of paperwork should be filed along with your tax returns. If you've incorporated a C corporation, all you have to do is file an application with your state regulatory agency and your papers will be approved.
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how to start an llc is easy, but how to protect against fraud when you're Forming an LLC is a bit trickier. One popular way for individuals and companies to establish an LLC is by using the "shell" of a company. For instance, if you own a small business that manufactures and sells exercise equipment, you can incorporate as a Limited Liability Company (LLC). You don't have to change the name of your business, although you may want to use your business name when you issue company checks.
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Limited Liability Companies are popular because they protect owners from personally liable for their business debts. Unlike corporations, LLCs don't have to pass-through their liabilities to their owners. Business owners can limit their personal liability to the actual value of their LLC's personal assets. This protects them against lawsuits when their business loses money due to their own negligence.
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Because an LLC has fewer IRS requirements than corporations, it's often less expensive to operate. As an owner of an LLC, you don't have to pay income tax on the bulk of your business assets, which can save you a lot of money. And, since an LLC is separate from your personal assets, you don't have to report them separately on your personal financial statements. This means that if you own a house that has some business assets, but only a few hundred dollars in liabilities, you'll need to pay less tax on those assets than you would if you owned a million-dollar house with millions in liabilities. And, of course, you can spread your liability out over several years or use different LLCs to pay your taxes and other expenses more efficiently.
Like corporations, how to start an LLC involves getting registered under its laws. This requires paying fees and paying taxes, but it also sets up certain types of limited liability for which you may be eligible. Limited liability companies are taxed as partnerships for income they receive, so any amount of dividends paid to you are taxable income. They're also not taxed like sole proprietorships, although if your LLC is sued, the partners would still be individually taxed for the partnership's share of the liability.
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