Starting a business as a Limited Liability Company in the United States is easy and convenient as the procedures involved are minimal and straightforward in their content. Limited Liability Companies or llc’s are the most suitable for small business entrepreneurs as they have the advantage of limited liability for the debts and action of the LLC as in a Corporation but with flexibility in management and pass through taxation.
Setting up llc depends on the statute of your state of domicile. Most states do not restrict ownership and an llc can be owned by a single or several individuals, other llc’s, corporations and even foreign entities. Though, business like banks, insurance companies or non-profit organizations generally cannot be set up as llc’s.
To form llc, the legal requirements and regulations of the state in which the llc is to be set up need to be complied with. Each state may have its own rules and regulations regarding the formation of Limited Liability Companies. The owners of an llc are termed as members rather than partners or share holders.
There are certain llc forms and documents for starting up a business in every state. The basic documents are an Operating agreement and Articles of Organization. The operating agreement is drawn up by the members which sets forth the functions of the business, members interest or investments, voting rights, profit/loss sharing ratio, management policies, rights and duties of members and the dissolution or termination conditions. Articles of Organization are the basic charter for your business to engage in a lawful business activity in the state of registration. It should contain all basic information about your business including but not limited to Name and principal place of business, nature of business, registered agent’s name and address, name and addresses of the principal officers and the know members of the entity. Some states term this as Certificate of Organization also.
Limited Liability Companies are not recognized as a classification for tax purposes. Llc taxation must be done as a recognized federal tax entity as that of a corporation, partnership or sole proprietorship. Members can elect to be taxed as any one of the recognized tax classifications by filing a form 8832 with the federal government. Llc taxation filing includes wage and tax statement (w-2, W-3) and Forms 941 to 944 if it has paid employees and 1040, 1065 or 1020 for profit or loss from business in accordance with the classification the business has elected to be taxed.
