It is most likely that you’ve decided to start off with a new business of your own where you are planning to sell a product that you’re passionate about. You must not be in love with the complicacies of business law! But as soon as you find yourself pressed to make left and right legal decisions about how to form an LLC, you will realize that this the beginning of your legal encounters as a business owner.
Although it is a fact that it is relatively simple to form an LLC, yet there are few relevant things that you need to know before forming one. There are lots of benefits and downsides of this specific business entity. Here is a list of things that you should be aware of.
#1: Comprehend what the LLC is and what it isn’t
There are few business structures from which you can choose, the partnerships and sole proprietorships to LLCs and S Corporations. Each of them offers its own pros and cons. If you take a look at the free legal sites, they describe LLC as a hybrid which amalgamates the best of corporations and partnerships. You will get a clear breakdown of the different services that you can offer through an LLC.
#2: Choose to know the benefits of an LLC
Versatility is one of those terms that are often used to define LLCs and that too for a worthy reason. When you form an LLC, you can decide freely the way you want the business to be taxed; in what way the profits will be distributed to owners and the people who get rights to management. This is the main factor which makes LLCs the ultimate choice for small business organizations. With an LLC, the entrepreneurs can transfer items totally free of tax.
#3: Don’t forget the downsides
Does your LLC have only one member that is you? If answered yes, then your company will be automatically treated as a sole proprietorship for purposes related to tax. This can be solved by issuing a very small percentage of shares to a relative or a close friend so that you can transform your business into a true partnership. However, be aware that you can’t count your spouses.
#4: The process of setting up an LLC is not as tough as you can expect
Forming an LLC, as mentioned above, is not a very tough task and it can be simply broken into 4 steps. Firstly, you should choose a name for your LLC, secondly, you have to decide how you will manage the business, thirdly, file the articles of organization with the secretary of state and lastly create your LLC operating agreement.
Therefore, now that you know the steps to set up an LLC, you shouldn’t wait to form one. Just ensure hiring expert registered agents who can receive lawsuits and work on your behalf when you’re not present in the office.