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The Essential Facts of LLCs You Need to Know as a Small Business Owner

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Forming a Limited Liability Company (LLC) is inexpensive and easier than other company structures. If you’re thinking of starting your own LLC, that’s great. 

But be warned, a wrong move can cost you serious money in business. That’s why it’s important to invest time in research before you take any big steps. 

Before you form your own LLC, make sure you know all the essential facts about how this company structure functions. 

Understanding LLCs

An LLC is a hybrid company structure that includes the features of Corporations and Partnerships. They take the concept of limited liability protection from Corporations and that of flow-through taxation via Partnerships.

Owners in an LLC are referred to as “members.” There is no restriction on the number of members in an LLC. 

But who can be members of an LLC?

They can be Corporations, individuals, or LLCs.

Advantages and Disadvantages of LLCs

Let’s take a look at some of the advantages and disadvantages of LLCs.

  • Advantages: They don’t have a double taxation system. Plus, the members are not liable to pay any debt taken on by the LLC. Members get to decide how they want to split their profits between them.
  • Disadvantages: You need to provide federal- and state-level filings for all LLCs. The state filing fees need to be paid for the year when you file and for each year subsequently. 

These are just some of the pros and cons of LLCs. If you think forming an LLC is right for you despite the disadvantages, check out the next section. We’ll take a look at how you can form your own LLC.

Forming an LLC: What to Do

First, you need to get your LLC EIN (Employer Identification Number). After that, the next step is to file your Articles of Organization with the Secretary of State. 

You can go about the entire process on your own. However, if you don’t have time to handle it all, you can hire a lawyer or professional filing services.

You’ll also be required to prepare an operating agreement that defines your LLC’s functional and financial framework. Not all states in the USA require you to prepare an operating agreement. However, for the sake of clarity, it is recommended that you prepare one.

Want more information on LLCs? Check out the infographic below by GovDocFiling.

The Essentials Facts of LLCs You Need to Know as a Small Business Owner
Image Courtesy: GovDocFiling

Author’s Bio:

Brett Shapiro- co-owner of GovDocFiling.

Brett Shapiro is a co-owner of GovDocFiling. He had an entrepreneurial spirit since he was young. He started GovDocFiling, a simple resource center that takes care of the mundane, yet critical, formation documentation for any new business entity. 

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