How to form a LLC

You want to start your own business or you have started your own business. Now what? You may want to set up a single member liability company.

There are different types of businesses. Most Secretary of States offices have information and forms on forming your own limited liability company (LLC). Here is a website for all 50 states:

http://www.coordinatedlegal.com/SecretaryOfState.html

If you own your own business and have not done any business planning, then you most likely are operating a sole proprietor.

The sole proprietor is probably the most common type of business. The problem with a sole proprietor is that you have unlimited liability. Depending upon the state you are in you may be able to form a sole member limited liability. This would allow you to have limited liability.

A Limited Liability Company does not require all the formalities which make it easier to operate. A Limited Liability Company will have members. It can be run by a manager or its members. You don’t need to have annual meeting but it is probably a good idea.

If there are more to owners in the company you should talk to your CPA or accountant as you will need to file tax returns for the companies. If are a single member LLC, then you could also have your LLC treated as a disregarded entity for tax purposes. This makes sense for most single member LLCs. You should discuss this with your CPA or attorney. It is a good idea to talk to your accountant and CPA as he or she will know your situation and provide the best solution or advice to you.

If there are two or more people in business then you are probably operating as partnership. If you do no business planning, then most likely you are operating as a partnership. This is not good because a partner has joint and several liability with the other partners. This is not so in a limited liability company. Also, you need to plan ahead to have buy out agreement or operating agreement if you should decide to break up the company. It is better idea to plan ahead and agree on these terms instead of fight over the break up in court.

You should probably not continue to operate as partnership due to the liability issues. You may want to consider forming an LLC. It is a good idea to have an operating agreement to outline how the partnership will operate and what happen if it is dissolved.

If you are considering forming a LLC, then you should check with your state’s secretary of state’s office and talk to a business attorney and CPA in your state.

Here is a link with more information:

How to form a LLC