In all 50 states, an LLC has perpetual duration just like a corporation.  This means that once one is formed at the state level, it continues to exist as long as it remains in good standing with the state.

In order for an LLC to remain in good standing, it needs to always have a properly appointed active LLC registered agent; it must submit any required state information filings to the state on time; and it must keep up to date on any maintenance fees owed to the state.

Most entrepreneurs set up their LLC to have the default perpetual existence. An LLC can always be terminated at any time in the future by the filing of a certificate of  termination if and when the members decide that the entity is no longer needed.

While a perpetual life is a default attribute for the limited liability company, you can limit the life of your specific entity if you want it to automatically terminate by a certain date.  This is accomplished by including a provision in the charter document of the business stating that the LLC will terminated on a specific date.  If you do this, then when that date comes, the limited liability company will cease to exist.

This state was Wyoming  and its laws were modeled after the German GmbH Code and the Panamanian LLC.  The laws allowed the LLC to be used for any lawful purpose except banking and insurance.  The original LLC laws were modeled to more closely resemble partnership structures.  This was noted primarily in the fact that they had limited life durations.   Florida followed suit and enacted LLC legislation in 1982.

Only a trickle of states followed in the next decade.  The reason the LLC did not take off back then had nothing to do with the state law attributes.  In fact, the LLC from inception provided a lot of flexibility and simplicity which is perfect for the small business.

However, the reservations existed because of tax concerns.  The IRS had yet to weigh in on how the LLC should be taxed.  And, when they did pass regulation, the provisions were confusing and difficult to apply.

It was not until 1988, when the IRS finally issued a ruling that treated a particular Wyoming LLC as a partnership for federal tax purposes.  As this point, more states started enacting LLC laws.  Still, there was much confusion over tax matters.  But, in 1997, the IRS adopted regulations that solved all the tax problems.  The LLC could, in essence, choose its tax strucutre.  More importantly, it would automatically qualify for pass through partnership taxation status.

This opened the flood gates for LLC formations.  The momentum grew even more as each state amended its limited liability company laws to provide for single member LLC entities.  At this point, it became a no brainer for every sole proprietor to use the LLC as a means to run his or her business and obtain the personal liability protection and other benefits offered.

The first and most important step is business incorporation.  Business incorporation involves setting up a separate legal entity to be the operator of the business.  You can be an owner of the entity and you can also be actively involved as a director, officer and agent of the business. When you incorporate, it is the corporation that is party conducting the business.  When you are representing the business, you are acting as an agent or employee.  What this does is it creates a layer of protection between  you personally and the business activity.

It is business activity that can give rise to liability.  Lets say your business enters into a supplier contract and there is a dispute.  Or, another example might be if your business has a store and someone slips and falls.  Or, say you have a rogue employee who sues the business for wrongful termination.  In all these cases, the party that needs to address the dispute is the legal entity business.  Without business incorporation, it would be you personally who would be the target of the problems.

And, if in the end of any of these kinds of disputes, you are found liable, then your personal assets are at risk for making good on the liability.  On the other hand, if you run your business through a separate legal vehicles such as a corporation or a limited liability company, then it is the company’s assets that are at risk- but not your personally.

Because business disputes and challenges are inevitable in almost any entrepreneurial venture, this protection is so important.  Furthermore, with the substantial rise of small business lawsuits (a trend that is only continuing), this becomes even more essential for business owners.

Business Incorporation can be handled as an administrative matter with the state agency that processes formations.  You can handle it yourself but it is critical that you learn all the specific requirements because an improper incorporation can put your liability at risk.  Another option is to hire a lawyer or for a more affordable alternative, you can use a reputable incorporation services provider – just make sure they are experienced.

The first step is to come up with a name.  Legally, every state generally will not allow you to use a name that is already registered with the state.  These names include not just other LLC entities but corporations, partnerships, and sometimes even state filed DBA registrations.  Spend the right amount of time coming up with a good name for your company and then check with the state to see if it is available for use as a limited liability company name.  If you are using a reputable formation company, they will check and ensure name availability as part of the filing.

The next step is to decide whether you will serve as the registered agent of the company or whether you want to retain a lawyer or a registered agent service.  If you are really cash strapped, then you can serve in this role as long as you have a permanent physical address in the state of formation where officially delivered documents (e.g., personal couriers) can be accepted and sign for during business hours.  However, the better choice is to retain a good national registered agent services company to handle this for you and your business.  This not only takes away the stress of compliance but also keeps your name off the publicly available registered office records.  Many marketers tap this database and send a lot of junk mail.

All states require an acceptable name and a registered agent.  Each state differs in what other information, if any, it requires as part of a limited liability company formation filing.  It is important to check with the corporation agency in our state for the list of mandatory disclosures and the required formatting of the filing documents.  Some states require the disclosure of members while others want a business purpose and principal office address.  Every state allows for additional provisions to be included if desired by the company.  For example, many companies want to include an indemnity provision to confirm protection of officers and managers.

Finally, the payment of a filing fee is part of every formation process.  Fees can be confusing in certain states.  This is because there is a standard fee and then potential add on fees.  Add on fees usually are for faster processing.  Processing time is very important.  Some of the more popular states like California and Delaware have extremely long processing times if you just submit the standard filing.  However, for a minimal expedite fee, you can get your LLC formed in just one or two business days.

You do not want to conduct any business or enter into any contracts until your limited liability company has been completely formed and a certificate of existence has been issued by the state.  Why?  Because your personal liability protection is based on the existence of a fully compliant legal entity.  In addition, it is a nightmare to start conducting business in your own personal name and then trying to properly transfer such activity into an LLC that has been formed after the fact.  It is done all the time as it is always better to start one  for business than not to at all.  However, even if you do, any business related obligations, lawsuits or activity that was conducted before will not be protected by a business vehicle that is later formed.

The main reason for using one is to create an independent and separate vehicle to run and conduct activity.  This separation from the owners of the limited liability company creates a layer of personal liability protection for the owners.  For example, if you start and run a business without a legal entity such as an LLC, you are completely and fully personally liable for anything related to your business.  This is because a business run this way (known as a sole proprietorship), is a part of you as a person.

By forming an LLC, you create a separate house to be the operator of the business.  This kind of entity is similar to a corporation when it comes to personal asset protection, but it is more suitable for the smaller business enterprise because it is a much simpler entity to create, maintain and manage.  In addition, it is a much more flexible entity than the corporation precisely because it was created to offer the benefits of a corporation without the disadvantages.  The LLC laws allow the owners to structure the ownership, management, and operation of the entity in a way that meets the needs of that particular business.  There are very little required formalities and requirements in the LLC laws.

Some people mistakenly refer to this entity as a limited liability corporation but it is not an incorporated entity at all.  The label of incorporated or unincorporated does not matter practically because you get the same level of protection.

Another advantage of a limited liability company is tax related.  With a corporation, profits are subject to double taxation and often you cannot take advantage of business loses immediately.  The LLC offers automatic and unqualified pass through taxation (also known as a single layer of taxation) and this results in less taxes and the ability to pass through losses that can be leveraged by the owners of the business to offset other income in many circumstances.  Check with your accountant for specific details.

Finally, the state legislatures of almost all 50 states are committed to continually improving the limited liability company laws to address any limitations or challenges that are faced as more and more people use it.  This has resulted in creating an even more perfect entity for small business.

As a result, the limited liability company has far outpaced the corporation when it comes to small business.  This is because it is ideal for many uses when it comes to running a private business, a joint venture, estate planning, asset protection strategies, real estate and self employment/consulting.

Prior to the Internet, the only way to do business with CT was to set up an account with them and get associated with an account manager.  Larger law firms invested in expensive software to handle the communication and orders.  However, when the Internet came along, it provided an excellent interface that everyone had access to.  Accordingly, CT corporation started an affiliated business to provide similar services directly to small businesses and entrepreneurs.

This business is known as The Company Corporation (aka Incorporated.com) and it is an online incorporation service provider backed by CT Corporation.  Now, everyone can get affordable access to their reputable LLC formation and incorporation services at extremely affordable rates.  They back their services with a solid $50,000 corporate veil guarantee. Click Here for a Company Corporation Review

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1.Come Up with a Name for Your Company and Product/Service.  It is important to come up with a name for your business that is not already being used by anyone else in the areas where you will conduct your business activity. You can check with your state corporation agency and your local county or city’s business licensing office to confirm.

Equally important is that if your company is being created to sell a product or a branded service, you also need to decide on a product or service name and check to make sure it is not already being used in the industry in which you are going to be participating in.  This too can be a violation of law- called trademark laws.  For some businesses, a branded name is more important than others.  And, if you are planning on distributing your product and service to more than just the local area, then you need to really make sure your trademark is available for your use.  You can run a search at the US Patent and Trademark website or pay for a search to determine whether there are any issues.

2. Create a Legal Entity for the Company.  Before conducting any business activity, you need to create either a corporation or a limited liability company to operate the business.  The biggest reason for this is to protect you and your personal assets from being lost due to business obligations and problems that may arise in the future.  Given the statistics in this country where small business disputes and lawsuits are rising significantly, the small expense to incorporate or form an LLC is well worth the protection.

3.Complete Governance Organization of New Company.  Do not make the mistake of forming a legal entity at the state level and then not doing anything with it.  A new entity is just a shell.  First it needs to have owners.  For a corporation, these are shareholders and for limited liability companies, these are members.  There must be an official legal document establishing the owners and their rights and obligations.  Further, it needs to adopt a personality.  That means that it needs to be attached to a set of rules, procedures, and other guiding principles that determine how it will act to conduct business.  Certain roles such as directors, officers and managers need to be established. All of the major governance requirements are typically set forth in Bylaws or an LLC Operating Agreement.

4.Obtain EIN# and Open a Bank Account.  Another important legal aspect of starting a company is to make sure you keep the business finances separate from your personal money and accounts.  The best way to do this is to open a bank account right from the start for the business. As part of this process you will likely need to obtain an EIN# for the corporate or LLC entity.  This is obtained through the Internal Revenue Service.

5. Business License and Other Licenses. It is safe to say that most any new business will be required to obtain a business license in the locality where the principal business office is located (even if this is your home).  Each locality differs so call the business license office of your local county or city to determine the specific requirements.  Also, depending on the nature of your business, you may need to obtain other licenses or permits for your company. F or example, if you are rendering a service that is regulated by the state (e.g., engineering, medicine), you need to check with the relevant regulating state agency to determine if you company needs to file for anything additional.  Another example is if you plan on selling products.  In those cases, you will likely need a sales tax permit and will be required to collect and transmit sales tax.

6. Creating and Adopting a Business Plan.  This is not a legally mandated requirement but is such an important start up matter.  There is this saying that those who fail to plan, plan to fail.  It is a given that any new company will face challenges and twists and turns.  In fact, a majority of businesses go out of business within the first 2 years. The ones that are prepared to adjust and keep moving toward well defined business goals are the ones that will survive and then prosper.

Your business plan will reveal other essential matters that are specific to your business.

This means that if other documents such as contracts or shareholder agreements or bylaws contain conflicting information, then the Article of Incorporation will prevail.

Every state has a corporation statute which contains a legal provision setting forth what MUST be in the Article of Incorporation.  It these specified disclosures are not in there or are incomplete or inaccurate, then the filing will be rejected and is considered a faulty incorporation.  Each state varies in what these disclosures are.  For example, in some states, all that is needed is an acceptable name, a registered agent and registered office, an authorized number of shares and a signature by an organizer.  Others require more information such as business address, business purpose, list of shareholders or directors and certain mandatory statements.  You need to consult with your state’s specific requirements.

OWNERSHIP STRUCTURE

In addition to the mandatory disclosures, the Articles of Incorporation put in place the fundamental ownership structure of the corporation.  In other words, it defines the classes of stock and their relative rights and priorities. For a one class of stock corporation, this is a fairly simple disclosure but for ones with preferred stock or multiple classes, the Articles are typically multi-page documents because sufficient provisions need to be in there to put this structure in place.

Another popular provision included in Articles of Incorporation are indemnity provisions.  Liability is the biggest risk and concern when it comes to operating a business.  Corporations and limited liability company entities are used to reduce this exposure.  Some state laws only provide for lower level indemnity and allow Articles of Incorporation provisions to increase them.  And, some are the opposite and may offer more indemnity to shareholders,directors and officers than a particular business entity may be willing to give.  The best place to limit this is in the Articles.

By incorporating in Florida, you will get the same legal protection for shareholders as other states, but in addition, the corporation will also be a Florida law governed entity and thus able to take advantage of additional protections.

If you, as a shareholder, are a Florida resident, you get double protection when using Florida corporations for operating a business, owning and holding property,estate planning or other legal entity need.

It is very affordable to create a Florida corporation and the Florida state agency is extremely proficient in processing new formations.  The process involves preparing a document called the Articles of Incorporation and filing it with the Florida Department of State- Corporations Division.  You will need to choose a name that is not the same as or too similar to other entities registered with Florida and you need to appoint a registered agent.

The state outlines exactly what you need to do to forming a corporation, but because  a proper and complete incorporation is essential to obtaining the protection and other benefits afforded by a Florida corporation, you may want to hire a lawyer to handle it or use a reputable Florida incorporation services provider.

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For the limited liability company (LLC), the LLC laws do not require this as an officially and legal requirement for LLC formation.  One of the key drivers behind the LLC as an alternate entity was to impose a smaller number of formalities that the legislatures did not feel were absolutely necessary for every legal entity.  Because the LLC is designed to best accommodate single owner businesses or ones with a small number of related shareholders, the states did not feel that an LLC organizational meeting should be legally required 100% of the time.

Having said that, it is a good idea to have one or to have the initial LLC owners prepare and execute what is known as a Written Consent in Lieu of Organizational Meeting.  Why?  First, it is good business planning and the subjects addressed in such a meeting (and approved by the consent) are ones that every business should address at the beginning immediately after an LLC has been formed.

Second, it is a sign that the owners are maintaining the independence and separateness of the LLC from themselves.  This is a key factor if an owner ever gets sued and a lawyer tries to persuade a judge that he or she should be held personally liable for an obligation of the LLC.  We all know that the essence of an LLC is that there is a shield of personal liability granted by an LLC but there is also an argument called “Piercing the LLC Veil” that aggressive lawyers will use to try to get at the owners personally.  By having formal documents as evidence that the LLC has all its required authorizations and is conducting business separate and apart from the owners, those lawyers will have a close to impossible chance of prevailing.

In other words, maintaining regular governance documents (similar to those maintained by a corporation) is a good practice and it should start off with holding and documenting an LLC organizational meeting.

If you would like a form that outlines the approvals and can be customized to be the Written Consent in Lieu of LLC Organizational Meeting, the LLC Expert offers one that you can purchase separately or as part of a Forms set.

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Both types of legal entities are created in a state according to the states legal entity laws.  An S Corp is first incorporated as a regular corporation under the states general incorporation statutes.  Accordingly, it must file Articles of Incorporation, appoint a registered agent and process a standard incorporation filing.  Once formed, it must appoint directors to manage the business and typically shares are issued to shareholders.

No state has any different rules for S corporations than for regular ones.  The S designation is a tax designation only.  However, because the federal tax laws impose additional rules and restrictions, there are some limitations that an S Corp must abide by in order to qualify for the S taxation treatment.  For one, it can only have one class of stock.  Secondly, there are restrictions on the number of shareholders and the type of shareholders.  These can vary with the latest regulations but most S corporations have only a few shareholders and they are all natural persons who are citizens or permanent residents of the United States.

Check with your accountant for the list of requirements.  It is important that the S Corp not only meet these at the time it makes the election but that it continue to comply at all times.

TAXATION OF AN S CORPORATION | S CORP

As noted above, the S corporation is a state created corporation that has made a special election with the Internal Revenue Service.

The election is called a subchapter S election and in order for a corporation to make the election, it must meet certain restrictions and limitations (as summarized above).

In order for a corporation to be treated and taxed as an S Corp from the date it was formed, the S election must be made within the first few months of its incorporation date.  Once an election is filed and submitted, a qualifying corporation is known as an S Corp and this designation is purely for tax purposes.

Once an S election has been filed and accepted, the corporation is now known as an S Corp for tax purposes and it is taxed under a whole different set of laws than a regular corporation.  This set falls under SubChapter S of the Internal Revenue Code- hence, its name.   Under this structure, the corporation avoids the double taxation of a C corporation and income generated is only subject to one single layer of taxation.

Another term used to describe the taxation is pass through taxation.  This term is used because the corporation itself will not pay any taxes.  Rather, the income that generates tax will be passed through to the shareholders in accordance with their proportionate ownership interests.  Then, each shareholder will report their share and pay taxes on their perosnal returns.  The income from an S corp is reported and calculated on a Schedule to the shareholder’s 1040 income tax return.

While the S Corp does not pay taxes, it does file an informational return with the Internal Revenue Service.

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This election is is known as an S election and the corporation becomes taxed under a different set of tax laws found under Subchapter S of the Internal Revenue Code.

In effect, the business will not be taxed as a pass-through entity which means that the entity itself will not pay taxes on its income.  Instead, it will just file an informational return and allocate the income tax burden to its shareholders based on their proportionate ownership interests.

The shareholders will then report their share of the corporation’s income on their own personal tax return and pay taxes based on their relative tax brackets.

The biggest benefit of a subchapter S qualification is that there is no double taxation.

Not every corporation can qualify to be taxed as a subchapter S corporation.  The IRS imposes a laundry list of limitations and restrictions that the business and shareholders must not only meet but continue to comply with at all times.  Failure to meet one, even if inadvertently, can result in significant tax liabilities.  Check with your accountant for the latest set of requirements as they can change from year to year.  Some of the major ones include: There must be less than 100 shareholders, the shareholders must all be natural persons (with limited exceptions), the shareholders must be based in the US, and there must only be one class of stock.

The benefit of this status is reduced taxation in most cases while still getting all the benefits of a corporation under state law.  Of interesting note is that another legal entity alternative, the limited liability company, offers similar single layer taxation without all the requirements.  You may want to consider comparing the two.

Here is a summary of the most common:

C Corporation

The C corporation is used to describe your bread and butter standard corporation.  This is the one that is created under the general incorporation statutes of each state.  Generally, it has shareholders and is run by a Board of Directors.

A C corporation can have on class of stock or multiple classes.  This type can be used for most any business purpose and can be as simple as a single shareholder owned vehicle for a small business or as complex as the largest corporations such as Walmart (the largest corporation in the world).

S Corporation

The S corporation is the same kind of legal entity under state laws as the C corporation. It is formed the same way and it is subject to the same state laws.  Where it differs is in how it is taxed.  The term “S corporation” is actually one created by the Internal Revenue Service.

If a regular corporation files what is known as an S election, then it is taxed differently.  It is only subject to one layer of taxation.  Income and losses are not paid at the legal entity level.  Rather, they pass through to the shareholders of the corporation and are reported and paid on their personal tax returns.

Not every corporation can be an S.  The IRS imposes a laundry list of restrictions.  For example, all shareholders must be individual people or certain trusts.  Other legal entities such as corporations or limited liability companies cannot be owners.  Also, there can only be a certain number of owners.

Another restriction is that there can only be one class of stock.  The IRS is known for changing and updating its regulations often so check with your accountant for the latest set of limitations.

Bottom line is that the S corporation gets to be a regular corporation for state purposes by avoids the double taxation of a C corporation.  In exchange, it must meet and continue to comply with all the restrictions and limitations.

Professional Corporation

A professional corporation is one that is incorporated for the sole purpose of providing a service that is regulated by a state agency.  The most common ones are used for providing licensed medical, legal, accounting, architectural, and engineering services.

Some states require that a licensed business use a professional corporation or a professional LLC while others make it optional.  The key limitations is that these types can only be owned by persons who are licensed to provide the service that will be rendered by the business.  Also, the business can only provide the licensed activity and not engage in other purposes.

Nonprofit Corporation

The corporation entity is the kind of entity used to start and run nonprofit companies.  In most states, there is a separate set of laws called nonstock statutes which govern the incorporation of entities to be used for charitable and other nonprofit purposes.

The incorporation of these is similar to the general legal entity but where things differ is that stock is not issued.  The major differences come not under state laws but under the federal tax laws that must be adhered to in order to maintain a tax exempt status.

The nonprofit tax laws are require complex and can vary depending on the type of charitable organization and whether the entity is a foundation. You must seek the advice of the proper lawyer if you are starting one.

Close Corporations

The close corporation is one that is used for very simple and small businesses.  It was designed to get rid of some of the formalities and requirements of a regular corporate entity when the business is owned by one or just a few related shareholders.

While there were good intentions behind it, there are very few close corporations because, in practice, business owners found that it was more onerous to keep up with the restrictions and compliance than to just maintain the formalities of the regular rules.

Plus, once the limited liability company (also known as LLC) became an option, the LLC was the more popular choice for entrepreneurs who wanted extremely simple procedures and less formalities and structure for their business.

Each state has its own rules and laws for what is required to incorporate a business in the state.  Most require that a formal document, called Articles of Incorporation, be filed with the state.  This agreement must contain certain legally mandated disclosures about the new business.

ARTICLES OF INCORPORATION

Some states like Delaware require very little disclosures.  You can incorporate with the disclosure of just an acceptable name, a stated number of authorized shares and a registered agent.  Other states require more information which can include a business address, a business purpose, and sometimes the shareholders or directors are required to be listed.  Check with your state’s requirements to know exactly what you need.

Articles of Incorporation are signed by an incorporator.  An interesting thing to note is that this signatory need not be a shareholder, director or officer.  It can be an attorney or even just a services provider.  Many choose to use a third party to provide another layer of privacy for the business.

The general rule is to include as little as possible on the Articles of Incorporation because it is a public document and you want to keep most everything about your new business private. However, there are some exceptions.  First, it is smart to include what is known as an indemnity provision in the Articles as this provides an extra layer of protection for the directors and officers of the business.

Second, if there are more than one class of stock of the corporation, your incorporation document will be required to have additional provisions establishing the classes and their relative rights to each other.  In these cases, you should always use a lawyer to ensure your Articles set up the proper equity structure for your particular business.

REGISTERED AGENT

Another requirement imposed by all states is that a registered agent be appointed as part of every incorporation.  This is the official person or entity, located within the state, that can accept legal papers and other official deliveries on behalf of the corporation being created.  Again, it is important you review the registered agent and registered office qualifications for your particular state.

FEE AND FILING

The last mandatory requirement is the payment of a filing fee and the submission of the documents with the proper state corporation agency.  First, the fee is going t either be a flat fee or a fee based on the number of shares that the corporation is authorized to issue.

Second, the agency is often called the Secretary of State (but some states use other terminology).  Make sure you review the instructions or call the state to ensure you are writing the check to the proper entity and mailing it to the right address.

The biggest reason for many rejected filings is providing the wrong payment and the next biggest mistake made is mailing the documents to the wrong address.  Get this right to avoid unnecessary delays.

LIABILITY PROTECTION

Most real estate activity involves some risk taking. If you are buying and improving properties for resale, you will be using contractors and other parties to help with the improvements. There will be contracts signed and potential for accidents and disputes that arise out of the business activity. If you are a landlord, there is significant risk as you will have a tenant- someone living on your property.

When you take into account the fact that your business is also holding property that is of potentially significant value , there is a lot to lose if a dispute or accident occurs or a lawsuit is filed.

Because of the risk profile that comes with real estate investments, it is imperative that the real estate and the business be operated through an asset protection entity. There are two main choices- the limited liabilitycompany and the corporation.

Both the LLC and the corporation offer the same level of personal liability protection. However, the limited liability company is more simple to run and easier and cheaper to maintain.

TAXATION

What you pay in taxes makes a real difference to the bottom line of any business. Accordingly, you will want to minimize taxes and any potential for paying more to the government as much as possible.
The real estate LLC is the dominant winner versus the corporation when it comes to taxes. With the corporation, profits from any business are taxed twice. If you sell a piece of real property, the corporation must pay taxes on the gain. Then, in order for you to reap the benefits of the profits, the corporation will distribute cash as dividends and then you personally will need to pay taxes again on any dividends you receive. When you are selling real estate, this double tax can be significant.

Even if you are primarily renting and receiving rental income, the same double tax would apply to your profits.

There are also better tax rules that apply to a real estate LLC when property is traded in for other property or converted into other uses (like personal use). Trades or property conversions made by a corporation will generally trigger tax consequences. If done through an LLC, there is an opportunity to avoid or delay the tax obligation.

SUMMARY

Because of both the liability and tax consequences and the fact that business owners and investors can run and manage a limited liability company with very little formalities and paperwork, the real estate LLC is the best property and business vehicle for holding real property such as land, houses and buildings and for conducting rehabs, improvements, development and rental activity.

As a result, it can be used for small business, real estate, holding and managing any property, family and estate planning, and joint ventures. One can be really simple such as for a single owner small business or an LLC can be used to handle very large and complex activities. For example, Fidelity Investments is an LLC which is owned by many owners and manages billions of dollars of assets.

This Article covers the basic attributes of this amazing legal vehicle.

CREATED BY LAW ONLY

A Limited Liability Company is a separate and distinct legal person that is created at the state level. It is only formed once a state has acknowledged its existence.

And, in order for a state to establish one, there must be a document filing made by an organizer. The filing is usually called the Articles of Organization and it must strictly comply with the requirements of a state. Each state has its own set of requirements and disclosures and fees.

PERSONAL LIABILITY PROTECTION

Once formed, an LLC provides its owners with legally endorsed personal limited liability protection from the entity’s debts and obligations. This feature is similar to the corporation.

If you are worried about personal exposure to law suits arising from your business, you should form a limited liability company. For example, you open a store-front business that deals with the public directly, you may worry that the commercial liability insurance you have might not fully protect your personal assets from potential slip-and-fall lawsuits or even claims by suppliers for unpaid bills. Running your business as a Limited Liability Company will give some protection against and other claims against your business.

PASS THROUGH TAXATION

If the entity is owned by just one member, then there is no added tax complexity. The income generated by the LLC is passed through to the single owner and reported on his or her personal return. Even if it is owned by multiple members, profits and losses are normally passed through the owners as if it were a partnership. But unlike a general partnership, on owners are subject to personal liability because of ownership.

This tax benefit is a significant one. The corporation, another alternative, offers the same personal asset protection but is subject to what is known as double taxation. While there is an option for elect for a corporation to be taxed as a pass through (single layer), there are quite a few requirements and restrictions. With the LLC, your entity will automatically qualify for the best tax treatment.

SIMPLE TO MANAGE AND OPERATE

Another great feature is that you can tailor the management and ownership structure of a limited liability company to suit your needs. There are very little legal mandates and this makes it easier for anyone to use one to meet their specific purposes.

The benefits of the incorporation are distinct and in most cases outweigh the disadvantages. However, this is not an easy decision to make and it requires both time and effort to get the best results. One has to weigh the pros and cons before making any incorporation. This will help determine the best company to use. There are a number of benefits going with the incorporation.

The key benefit that one gets is the limited liability for the owners of the business. Lawsuits are on the rise and the small business world is a prime target.  Reducing the personal liability is the main reason as to why people choose this option. When it comes to a corporate, it is usually a distinct legal entity. This means that the owner and his personal assets are not automatically at risk for the corporation’s debts or other forms of liabilities.

Incorporation can also provide a more credible image and official image to a business.  This is important because getting new customers to trust your company is very difficult today with all the competition and the schemes and frauds out there.  It is perceived to be a sign of permanency as well as reputability on the side of the customers and the clients.

Having a separate legal entity also makes it easier to attract investors and capital when needed to expand your business.  These vehicles have units of ownership that can be issued in exchange for receiving cash equity into the company.  For corporations, the ownership is evidenced by shares of stock and for limited liability companies – membership units are typical.

After one incorporates a small business, they are assured of perpetual existence. This is unlike the sole proprietorship. The business continues to exist even after the owner dies or leaves the business. The business will continue to exist until the shareholders take the necessary measures to dissolve it or when it is merged with another bigger business.

For a new business, incorporation has become very affordable because of reputable incorporation services providers.  You no longer needs thousands of dollars but can accomplish this important start up task for just a few hundred.

For an existing business, the way to move the business to a corporation or limited liability company is to for the legal entity first and then transfer all the existing business assets, contracts and other property into the corporation or LLC.  It is better to do this as soon as possible because as a business gets more successful, it becomes more at risk for lawsuits.  Another important point is that a party can sue you or your business for something that happened years ago.  Accordingly, if years ago, you were operating as a sole proprietorship, you remain at risk for years later for potential business liability.  It is better to obtain the protection from the start by incorporating a small business.

People often wonder whether a particular structure will offer enough benefits and is worth any the potentially additional administration. The small business corporation is a popular option for businesses.

There are a number of benefits associated with this structure. To start with, all owners will receive personal liability protection afforded by the corporate entity. While this protection is essential in today’s business environment, it is not an absolute protection.  You should still get business insurance and you may end up being asked to personally guarantee business debt at the initial start up of your company.

This legal entity also provides an excellent structure for taking on investment so if you plan on raising money for the business, the corporation is ideal for facilitating an equity transaction.

It also comes with a standard built in governance structure.  The small business corporation will be managed by a central body called a Board of Directors.  The Directors can appoint officers who will be tasked with running the day to day business.

While a corporation by default is subject to the double tax structure of a C corporation, it can qualify for a single layer of taxation by making what is known as an S election to the Internal Revenue Service.  Not all small business corporations will qualify.  Check with your accountant.

Another benefit is that you can more easily sell a business that is housed within a small business corporation. Because the entire business is within this separate legal entity, it is easier to sell the company because you can just issue the ownership of the corporation to the new owner. Ownership is generally represented by shares.

While bankruptcy is an option, you should always consider other alternatives before filing.  Other options include working out a repayment plan with your credit card company or possibly looking for a consolidation company that can pay off your credit cards and issue you a more practical repayment plan.

Filing for bankruptcy safeguards an individual or business against creditors. In bankruptcy filing, there are two parties involved: Debtors and Creditors. A debtor is the party in debt and owes money to the creditor whereas the creditor is an organization or a person to whom the money is owed.

There are two types of debts, secured debts and unsecured debts. In secured debts, the debtor gives guarantee for repayment of loan by giving something like a pledge. In case the debtor fails to repay what he/she owes, the creditor has the legal right to obtain other belongings of the debtor which was kept as security. In unsecured debts, the debtor gives no guarantee and therefore, the creditor has no legal right to collect the debts and no right to obtain any property held by the debtor. Credit card debt in most cases are unsecured and credit cards cause a lot of bankruptcies.

Filing for bankruptcy can help an individual or company restore their financial position. Bankruptcy has an adverse effect in that it spoils the credit history of an individual for up to ten years and during this period, the individual declared bankrupt will not be provided any credit by creditors. After bankruptcy has been filed, an individual can rebuild his/her credit report over some time through improving their financial condition which will not be easy because the dependency on credit is increasing at a very high rate. Many people do not wait for their wages, they simply use credit cards to do their purchases then repay back afterwards.

The factors that contribute to bankruptcy include, loss of jobs, bad habits such as smoking, alcohol, drugs, divorce, high medical bills, financial dependency on other family members and creditors have the major contribution on increased bankruptcy levels.

Before making unnecessary purchases or taking unnecessary loan, think about the possibility of not being able to repay the debt. Be careful on how you spend your money and stay out of debt and bankruptcy.

This Article explains exactly what you need to know to ensure that you have the right person or entity serving as the registered agent for your company.

CLICK HERE FOR LLC REGISTERED AGENT SERVICES INFORMATION

WHAT IS A REGISTERED AGENT

This role is pretty simple. It is a person or legal entity that must be available at a designated address to accept legal papers or any official documents sent to the LLC. The registered agent must have a permanent physical address located within the state where the limited liability company has been formed.

The agent is merely an administrative appointment with the limited role of accepting deliveries made to the limited liability company and forwarding the documents, packages, papers to the last known business address of the business.

The person or business serving in this role has no duties to advise or consult the LLC and does not even have to open the packages received. But because any delivery made to a registered agent will usually be important documents, it is important that every company appoint a reputable and reliable service to serve this role.

WHY IS ONE NECESSARY?
The LLC, just like the corporation, is a fictitious being which means that it only exists because the law says so. It does not have its own physical being and presence the way a natural person has a body.
Because of this, there can be confusion by other parties or the public generally as to how to officially communicate with the company. This becomes really important when a state agency or another party needs to serve legal papers or official notices to the business.

WHO CAN SERVE AS A REGISTERED AGENT
Each state varies when it comes to determining who is qualified to serve as a registered agent for a legal entity registered in the state. For most states, there is a requirement of a permanent physical address located within the state. The person or entity should be present at such address during business hours to be able to accept any deliveries made.
Some states impose additional requirements such as mandating that the designee also be a member or manager of the company, a lawyer licensed in the state, and/or a legal entity that is properly registered and authorized to do business in the state.

CHOOSING A REGISTERED AGENT PROVIDER
If an owner of an LLC has a permanent address within the state and does not mind disclosing it on the public corporate records, he or she can serve as the registered agent of a limited liability company.
However, the better decision is to retain the services of a professional and credible national provider of RA services. By doing so, you can have more peace of mind that there will always be a person present to accept legal papers on your behalf of your business and notify you promptly of any activity. Some services also offer additional valuable services such as notifications about state filing requirements and online tools for ensuring your legal entity always remains in compliance.

When choosing an LLC registered agent provider, insist upon using a reputable and national provider.  Do not trust just any company to serve in this role because this agent is going to be the officially appointed person or entity for receiving important legal papers on behalf of your limited liability company.

CLICK HERE FOR LLC REGISTERED AGENT SERVICES INFORMATION