Creating an LLC is a great way to reduce paperwork and red tape while still keeping your personal finances separate. But there are a few key details that you need to know, too.
An LLC is a type of business entity that offers limited liability protection to its owners. Its flexible structure makes it a good choice for small businesses and entrepreneurs.
Articles of organization
A simple document that lays out key information about your business, and articles of organization are one of the first steps to establishing an LLC. They are filed with your state and make your llc an official entity.
While many states have ready-to-use articles of organization forms, the requirements and details will vary by state. Whether you need to write your own or use the state-provided form, it’s important that you get this basic information right.
In most cases, Articles of Organization should contain a statement of purpose and a brief description of the goods or services your business will provide. These details will help you explain to the state why your business is formed and how it will be managed.
Other details that should appear in your LLC’s Articles of Organization include the name, address, and tax ID number of the company’s registered agent. This is the person or service you will hire to receive all legal notices and documents from the state.
An LLC operating agreement is a legal document that outlines the rules your business will follow. It protects your company from liability and helps you navigate important events like buyouts.
An operating agreement is different from a certificate of organization because it gets into the details about how your business will operate. It describes procedures like voting, meetings, key communications and conflict resolution.
The operating agreement also explains how the members will be structured and how they share profits. This can help you avoid conflicts that are common among businesses that don’t have an operating agreement.
Typically, the operating agreement will also include details about how management is managed, including a list of managers, how they are selected and their terms of service. It may also set up limitations on management’s authority, such as requiring members representing a certain percentage of interests to pre-approve actions.
You can use our customizable tool to create your own operating agreement, or sit with a business attorney who specializes in your state’s laws to write one up for you. Either way, an operating agreement is a critical step for any business.
A registered agent is a person who receives important legal notices and tax documents from the state on behalf of your LLC. It can be a member of the company or a third-party business.
The state will send your registered agent important government communications such as annual filings or notifications about a lawsuit filed against your LLC. It will also serve court documents such as garnishment orders and charging orders.
If you’re forming an LLC, you may choose to name yourself as the registered agent, or you can hire a commercial registered agent service.
Choosing your registered agent is a major decision that could have significant consequences for your LLC. The registered agent you select should be a person who will work from the statutory address during business hours and should be available to receive and respond to important government and legal correspondence.
If you are registering an LLC in New York, be sure to select a registered agent with a local business address. Failing to do so may have adverse consequences, such as missing important state filings or being unable to respond to a legal document in time.
LLC owners have many options in deciding how their LLC should be taxed. Usually, the best option is to hire a knowledgeable accountant who can help you understand your business and choose the right tax structure for your situation.
The IRS gives LLCs many different ways to tax their earnings, from sole proprietorship (in case of a single-member LLC) to partnership or corporation status. The IRS also offers a number of tax deductions and credits that can reduce an LLC’s tax bill.
If your business will regularly need to keep a significant amount of profits as retained earnings, you may want to consider corporate taxation. You can make this election by filing Form 8832, which enables your LLC to choose its own tax treatment for profits it keeps in the company.
LLCs that elect to be taxed as corporations pay taxes at lower rates on the first $75,000 in profit that they earn. However, they cannot switch back to pass-through taxation for five years, so they must treat the decision seriously.