A limited liability company, or LLC, is one of the simplest and most flexible business structures specific to the United States. Simply put, this hybrid legal entity is a combination of the benefits of pass-through taxation offered by a partnership or sole proprietorship and the limited liability of a corporation.
While sometimes referred to as limited liability corporations, LLCs are different from C corps and S corps. They do, however, provide the same limited liability protection as corporations.
LLCs typically offer greater flexible and less ongoing requirements than a corporation, making it well-suited for companies with a single owner, medium- or higher-risk businesses, owners with significant personal assets they want to protect, and owners seeking a lower tax rate than they would get with a C or S corp.
Pros of an LLC
Cons of an LLC
Taxation. “Double taxation” is when two or more jurisdictions levy tax on the same declared income. As an LLC, you can avoid this problem thanks to pass-through taxation. This means owners report their share of profit/loss on their individual tax returns rather than their corporate tax return, thereby avoiding double taxation.
Protection. Owners have legal protection against some or all of the LLC's debts and liabilities. An LLC protects you from personal liability in most cases, meaning your personal assets (i.e. your vehicle, house, savings accounts, etc.) won't be at risk in the event that your business goes bankrupt or gets sued.
Flexibility. LLCs offer a great deal of flexibility, allowing owners to decide how they want to be taxed (as a sole proprietor, partnership, S corp or C corp), how many members to have and where members can be from.
Simplicity. An LLC has much less administrative paperwork and record-keeping than a corporation.
Credibility. Partners, suppliers, lenders and customers generally see LLCs as more trustworthy and credible businesses.
Growth. Raising additional financial capital for an LLC may be more difficult since you cannot issue shares of stock to entice investors like corporations can.
Uniformity. LLCs may be treated differently in different states, which can make staying in compliance more confusing. For example, certain states - like Texas, New York and California - levy a franchise or capital values tax on LLCs, while some states - like Delaware - have a simple flat fee. Other states can have a combination.
Self-employment. Owners or members of an LLC are considered “self-employed,” so earnings may be subject to self-employment taxation depending on your state's statutes.
Appreciation. If you convert an existing business (incorporated as a corporation, sole proprietorship or partnership) to an LLC, extra taxation may occur on appreciated assets.
Fees. Depending on your state, you may have to deal with special costs associated with LLC formation - such as renewal fees (as in Maryland) and publication requirements (as in New York) which force LLCs to publish news about their formation in a local newspaper.
It depends. Ultimately, you must consider individual factors unique to your specific business venture before deciding if a limited liability corporation is the best business entity for your company.
At MaxFilings, we make the incorporation process as simple as possible. We specialize in helping business owners form an LLC in all 50 states and D.C. - including popular states like Delaware, California, Florida, New York, Nevada and Texas. You can save your information with no charge or obligation, and come back any time to continue the process at your convenience.
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Forming an LLC may differ depending on which state you wish to incorporate in.
In general, though, the standard process typically looks something like this:
The name must be available and comply with the LLC rules specified by your state.
Pick a state in which to incorporate your LLC. Determining a location for your business can depend on many factors - including state taxes, laws, customer base and the location of business owners.
Draft and file your Articles of Organization with the Secretary of State's office and pay the filing fee (ranging from $100 to $800 depending on your state).
This document spells out who will run your business (managers or members), how many owners are in the business and what their rights and responsibilities will be.
In only a few states (Arizona, Nebraska and New York), you are required to announce your intent to form an LLC in a local newspaper or publication. If you aren't forming an LLC in these states, you can skip this one.
Apply for a business license, local permits and industry certificates if needed.
Fill out Form SS-4 or apply online with the Internal Revenue Service (IRS) to get your Employer Identification Number (EIN). Also apply for any other necessary ID numbers required by your local and state governments for things like disability, unemployment and other payroll taxes.
Why Form Your LLC With MaxFilings?
Easy, fast, convenient
Your time is valuable. Spend it running your business, not dealing with paperwork. We can handle the nuts and bolts while you focus on making your company thrive.
Upfront, transparent pricing
Don't fret about hidden fees or unnecessary extras. At MaxFilings, there are none! The price we quote is the price you pay - no gimmicks. Learn more about our fees here.
No charge, no obligation
We believe you shouldn't form your LLC until you're ready. Start the process, save your information at no charge or obligation, and continue at your convenience.
From start to finish, we keep you in the loop through every step of the process so that you always know where your business stands in the incorporation process.
110% satisfaction guarantee
If you aren't completely happy with your service, we will refund your money. And if you find a lower price after incorporating with MaxFilings, we'll refund the difference plus 10%.