Forming an LLC

A Limited Liability Company (LLC) is a business that is its own legal entity; they can be a single member LLC (a single owner) or a multimember LLC (multiple owners).
An LLC is NOT an INCORPORATED business like a C Corporation or an S-Corp, but it has the benefits without the burdensome and expensive regulations and corporate formalities, making it an ideal way to start a small business or convert an existing business for personal asset protection.

1. Forming an LLC

2. What is an LLC? A Limited Liability Company (LLC) is a business that is its own legal entity; they can be a single member LLC (a single owner) or a multimember LLC (multiple owners). An LLC is NOT an INCORPORATED business like a C Corporation or an S-Corp, but it has the benefits without the burdensome and expensive regulations and corporate formalities, making it an ideal way to start a small business or convert an existing business for personal asset protection.

3. Benefits Personal Asset Protection Pass through taxation Corporations are essentially taxed twice: Once on the net income Dividends are then taxed Less regulation and paperwork

4. Benefits Protect Yourself with Limited Liability The owners of the business are not personally liable for the LLC's debts and other liabilities similar to a corporation, as the business is its own legal entity. Save Money with Pass-Through Taxation The LLC also has pass through taxation of business profits like a sole proprietorship or partnership, where the owners pay the taxes on their individual tax returns and corporate income tax is not paid, hence avoiding the double taxation of corporations Have the Flexibility of Single or Muti -member Ownership An LLC can by owned by one individual or by multiple people. If you plan to start a multi-member LLC, we highly recommend drafting an operating agreement to protect the members from future legal disputes. You can Choose Different Management Structures LLC can be managed by all its members (owners) or the members can elect a manager or managers (who can also be members) to manage the business.

5. LLC

6. An LLC is only one of several different types of business entities: S-Corp C-Corp General Partnership Sole Proprietorship

7. LLC vs INC An LLC has pass-through taxation avoiding the double taxation of business profits, unlike a corporation Greatly reduced State Regulations and formalities compared to a corporation Another previous advantage of a corporation, known as Corporate income splitting, is also now available to LLCs, if an LLC elects to be treated as a corporation for tax purposes by the IRS by filling form 8832. This is really only useful when the LLC is making sufficient profit that it can pay its members and still retain a significant chunk of it for reinvestment in the LLC. The main advantage a Corporation has over an LLC, is that it has more options to raise capital for investment, through the issuance of specific shares to investors or direct public offerings.  Though an LLC can be converted to a corporation when its members feel it is appropriate to do so.

8. Benefits of an LLC over S-Corp S–Corporations are incorporated entities that have pass through taxation, like an LLC, and which have shareholders who elect a board of directors who manage the business. They were popular before the arrival of the LLC. LLCs have the benefits of the S-Corp but do not have the cumbersome and expensive administrative and regulatory requirements.

9. Differences

10. You can go about forming an LLC by taking just five easy steps: Find a business name that is available (not taken by another company) and that conforms to your state's rules regarding names for LLCs. File your paperwork, normally called the "Articles of Organization," and pay the fee associated with the filing. Make the operating agreement that will dictate how the LLC will be run. This normally lays out the rights and responsibilities of all LLC members. In some states, you must also publish a notice that you intend to form an LLC. Get all the licenses and permits that your business needs to run.

11. Operating Agreement An operating agreement is a legal document outlining the ownership and operating procedures of your LLC.  This agreement allows you to form financial/working relations with co-owners into an established system suitable to your business .

12. Operating Agreement A solid operating agreement should help to identify/clarify: Company ownership responsibilities Profit sharing Ownership changes Draft Operating Agreement Review sample documents online or through lawyer or accountant

13. The following states  legally require  an operating agreement for LLCs: California for Single and Multi-Member LLCs Delaware for Single and Multi-Member LLCs Maine for Multi-Member LLCs Missouri for Single and Multi-Member LLCs Nebraska for Single and Multi-Member LLCs New York for Single and Multi-Member LLCs Even if your state requires you to have an operating agreement,  you do not need to file it with the State . Simply use it for your records .

14. Operating Agreement Even though an operating agreement is not mandatory in most states, it is considered a prudent business practice, especially if you are starting a multi-member LLC. Many people don't expect to have legal problems with friends or family in their business pursuits, however lawyers will tell you that many legal troubles could've been avoided if an operating agreement had been drafted.

15. Secretary of State NM http://www.sos.state.nm.us/Business_Services/NM_Domestic_LLC.aspx Articles of Organization Appointment of Designated Registered Agent

16. Meeting Minutes LLC  Annual Meetings.  LLC  owners, called members, are not  required  by state  LLC  statutes to hold an annual meeting and keep  minutes . However, the  LLC  structure allows members to determine how an  LLC  will be structured and operated by executing an operating agreement . Meeting minutes are a good idea in order to document what is decided and agreed upon.

17. Register With state and Federal tax authorities Get an EIN number Employer Identification Number Get local business license

18. Forming an LLC