A business with proper structure and flow of operations can go a long way. A structured hierarchy, starting from top to lower management, can guarantee smooth, easy, and better QA to detect any gaps in the system. Similarly, Ruesch & Reeve LLC lawyers follow this culture while drawing an agreement, it’s better to keep things black and white as much as possible. Ruesch & Reeve LLC lawyers can help you make sure you achieve all the steps correctly.
For this, LLC was adopted in the year 1977 by the state of Wyoming, USA, and later, it was caught up with other states in the 1990s. Later in the future, they have their norms and structure that governs the business forms. But it mainly revolves around forming business agreements. Let’s understand LLC in detail and what an LLC lawyer can do to help you.
What is an LLC?
The complete form of LLC is “Limited liability company,” a business structure in the USA where the owners or the members of the company are not personally liable for the company’s liabilities and debts. In other words, LLC is the hybrid of corporations that have sole partnerships or partnerships with multiple partners in different terms.
According to LLC lawyers at Ruesch & Reeve, it is a more traditional partnership agreement form that can vary from state to state; it mainly requires an article of an organization that needs to be filled by the state. It is pretty more manageable to set up than setting up a corporation, and it also provides a certain level of flexibility. LLC’s have the freedom not to pay federal taxes. Instead of that, the profits and losses of the company are listed in the owner’s personal tax returns.
LLC also has the choice to choose a different classification like a corporation. It is important to remember that in case of any fraud or if the company fails to meet legal and reporting requirements, by law, the creditors have the right to go after the members.
Minimize Liabilities
Like big corporations, LLC gives its owners a certain level of protection from any personal responsibility for the company’s debt. The level of liability of the members is only limited to the extent of investment done in the company. For example, if a customer falls and gets injured on the company premises, they have the right to sue the company, but the lawsuit cannot touch the personal assets of LLC members.
LLC provides a great advantage to the partners under this agreement. Technically speaking, all the partners are liable to the company’s debt; however, at least one person is still responsible in a limited partnership.
Avoid Double taxation
LLC enjoys an exemption from double taxation that is required from C corporations. In simple words, the LLC profits go through the company members who report their share of the profits in their federal tax returns. Federal taxes do not have to be paid by the company itself as the members distribute the money. However, the government can still impose state and local taxes on the LLC.
Flexile income distribution
According to some owners, the main benefit that most small businesses enjoy is the allocation of profits and losses that comes under tax purposes which is easier under this form. The LLC members can decide how to divide their earnings however they like depending upon their convenience but as long as they are following the IRS norms.
The Level of Simplicity with the help of LLC Lawyers
Another reason to choose an LLC is the ease of setup and running them. All that the LLC requires is filing the articles of the organization and drafting an operating agreement that defines a company’s policy. At the same time, a corporation requires a board of directors, officers, stakeholders, etc., and conducts a lengthy formalities procedure. Again, a proper LLC lawyer can help you with this.
Best for Foreign Investors
As LLCs currently exist in Europe and Latin America, businessmen in those countries are familiar with the norms of the LLC. It offers a minor imposing business structure; it attracts foreign investors and entrepreneurs who want to enter the American market.
Fairly New
The concept of LLC was pretty new in most states in the USA. Also there are not many proficient LLC lawyers who have quite an expertise in this area. Several states are still getting familiar with the norms of LLC and working on developing their own rules and regulations on governing LLC. The IRS is still working out its position concerning LLC.
Negative Perpetual Existence
Most of the states usually require setting a limit to the company’s existence; in most cases, it is usually 30 years. In the case of the absence of the clause in the operating agreement for the continuance of the LLC. During any event of death or withdrawal of membership from the company, the LLC ceases to exist. In other words the transfer of ownership is quite restricted as compared to a corporation.
Exclusions
There are certain limitations to LLC and what an LLC lawyer can help you achieve. Entities like banks, insurance, nonprofit organizations, etc., are off-limits to the agreement. But in the future, banks can be a part of LLC as they are pressuring the IRS to make rules that would allow such entities.
Till now, we have gone through the merits and demerits of having an LLC. Now let’s go through the part on how you can form an LLC in 6 easy steps.
Starting an LLC in 6 easy steps
An LLC is the most common business entity to set up, and it provides limited liabilities, management flexibility, and tax benefits. And since each state has its level of requirements. So it is necessary to set up your business after thorough research of the rules.
1) Decide the name of your business
Choose the name of your business that is more optimized from the marketing point of view. Also you have to ensure that the name is available. If another company by the same name, your state might prohibit you from using that name.
To know if the business name is available or not. You can use a search tool that will show whether it is available or not. In case of any clashes, if the business is on the other side of the country. And offers services that are entirely different from your product, then you might be able to use it.
2) Choose a registered agent
Most LLCs have a registered agent or LLC lawyer, who can accept the documents on behalf of the LLC, like correspondence from the government, lawsuits notices filed against the company, etc. The LLC lawyer must have a physical address in the state where the LLC is incorporated. This is because you have to list the agent information on the business formation documents.
3) Paperwork of filling the LLC
For creating an LLC, you must go through the process and file the appropriate paperwork or you can hire an LLC lawyer to do it for you. It is referred to as the “Articles of incorporation” or “certificate of organization” or “certificate of formation”.
4) Apply for EIN
Employer Identification Number (EIN) which is a unique tax identification number for the business. The application is free and can be easily applied through the IRS website.
5) Drafting of operating agreement
The operating agreement covers the detail of how an LLC should be run and managed. It covers how the members of the LLC can divide up their profit and loss shares. And also whether the owner can transfer their rights to a third party or not.
6) Apply for necessary license and permits
This part entirely depends on the type of business and the state where the company is operated. The Govt of some states or counties might ask for licenses and permits during the time of need. Also, commodities like food and liquor require different licenses from government agencies.
What Ruesch & Reeve LLC Lawyers Can Do
Hopefully, you might have an overview of what an LLC is, its merits and demerits, and how it can be formed in six simple steps. Firms like Ruesch & Reeve have a team of LLC lawyers who can help you out during any hiccups that you might experience in your business. They can also make sure to complete and file all your paperwork on time so you can focus on growing your business.