What Can Becoming an LLC Do for You?
A limited liability company or commonly referred to as LLC is a United States of America’s term for a privately owned company that is favored by many small business owners and entrepreneurs alike. The reason would be because the business owners are not personally liable for any of the company’s debts. This gave their personal assets and belongings liability protection that won’t be liquidated or confiscated to serve as collateral if the company is faced with a class action or any formal lawsuits.
As in today, the business structure is still sought out by many small business owners and entrepreneurs who want their business to soar higher and generate more profit.
What Can Becoming an LLC gain you?
Forming a limited liability company or LLC can do many things for you. It can give your business a legal identity that is justified by the law to be permitted to own money, property, and other kinds of assets.
And, as mentioned briefly above, your personal assets are safe from the risk of being used as collateral payment should your LLC be bankrupt. This contrasts clearly with a sole proprietorship or business partnership because they are not a separate entity in the eyes of the law. Therefore, it greatly increases the risk of losing personal assets like your house, cars, and personal wealth to pay off your company’s debts and liabilities.
In addition, another key benefit would be that you, as the business owner, remain the ship’s captain. You can freely manage your business’ day-to-day operation without interference from shareholders, nor do you have to hold annual meetings and such formal congregations that are tedious and tiring. This is why limited liability companies hold an edge over a corporation that has to hold annual shareholder meetings to keep them in the loop about the company’s progress and how much profit they made and creating an annual report for the state’s secretary.
How to Become an LLC?
The primary necessities to become a limited liability company would be:
- Your company name
- Certificate of organization
- Registered agent
- Business license
- Sales Tax
- Employer Tax
- EIN
- And, annual report for the state’s secretary
You will need to choose a company name that any other entity has not yet used. Then file your certificate of organization. Appoint your registered agent that can act on your behalf should your company encounter litigation actions. Prepare all of the state requirements like business license, sales and employer taxes, employer identification number. And submit your annual report on the state’s secretary’s website to finish applying your LLC application.
Takeaway
A limited liability company is a great business structure that can benefit you in many ways, especially if you don’t want to lose your personal assets in the event of litigation being thrown at your company. You will need to complete all of the necessary steps and requirements with the application fee to successfully apply to become a limited liability company.…
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One of the main reasons why most entrepreneurs go for LLC is due to less paperwork involved. When comparing it with corporations, you will notice that they provide limited liability, and they hold annual shareholders’ meetings and make annual reports.
More entrepreneurs are going for LLC because they are flexible when distributing profits to the owners. It is also crucial to note that they are not needed to distribute them equally or based on the ownership percentages. On the other hand, corporations must distribute profits to shareholders depending on the type of share and the number of shares.
It is crucial to understand that corporations have a fixed management structure with a board of directors that controls and manages various day-to-day activities. On the other hand, shareholders must meet annually to elect directors and conduct different company business. However, this is not the case with the LLCs because they have various ways to run the business.