What is an LLC?
I get asked all of the time, what is an LLC? The question about a limited liability company, or L.L.C., is a simple one as it is defined by the laws in our nation.
Each State Has the LLC Structure
Each and every state, in the United States has an LLC structure that can be setup. By saying that each State has LLC entities that can be setup, is saying that each state has Statutes or Laws that control how LLCs work within the state that you are filing in. So, for example, if you live in Nevada and you are filing a Nevada LLC, you will want to lookup information that is specifically related to the state that you are filing in. This information will be state specific and please note that each state can have totally different laws. So, you don't necessarily want to do a general search, and then feel like you've done enough research.
Benefits of the LLC Structure
The LLC structure is a popular one, and even more popular than Incorporating. When you think about forming an LLC, then you want to make sure that follow the steps that are required to do it. As we mentioned above, all 50 states have LLC entities and these entities are state entities and filed with the Secretary of State, within the state that you are filing in. This is a lot to think about, but don't worry, the process is a little bit easier than you think it may be. There are a few benefits that you can think of when you think about forming an LLC, so let's discuss those now:
- limited liability protection -
- pass through taxation -
- separation from your personal assets -
- investors like professional structure that can safeguard their investment -
Who Can File an LLC?
Once again, to answer this question be sure to check with your Secretary of State if you have questions, but in general anyone can setup an LLC, including foreigners to the United States. The reason that they make it easy to register and file for an LLC, is that States want investors. Each State is competing for tax dollars, and investor bring in tax dollars when they move there or open a business there. In todays economy, you even see states advertising online, and on television to encourage businesses to move into the state. Two popular states that do this are Virginia and Texas, as these are business friendly states.
In general, minors ( a person under 18 ) can be owners of an LLC, however, it is not recommended that they form the LLC or be the only member of the LLC. So, if a minor is going to be part of an LLC, they may want their parent to form the LLC and to be an additional owner of the LLC. Now, remember that all LLC laws are state specific, and so check with your state directly to ensure that there aren't any laws that prohibit minors or a person under 18 from being a member.
Also, a foreigner, an organization, a company, can all be members or Organizers of an LLC. Some states require that founding members be identified while other states do not have this requirement. Also, some state will require that the members are submitted to the state annually so that the state or its citizens can know who are the owners.
Is an LLC better than a Corporation?
First, let's not forget that whether you incorporate or form an LLC, you are doing a good thing by keeping your personal assets separate from your business assets. This is a very important aspect of forming an LLC. The next thing to remember is that the LLC structure is different than the corporation structure. Both the LLC and the corporation are regulated by laws formed at the state level, and so they are different in this regard. The next thing to remember that while they are different, this means that they have different requirements. So, it cannot be said that an LLC is better than a Corporation. A person, lawyer, or CPA may be able to say that in a specific situation one is better than the other, but without knowing the facts a person cannot make a blanket statement that one is better than the other. If you are looking to take a company public, then the LLC structure or the S-corporation structure are not appropriate. For one reason, the S-Corp can only have a maximum of 100 shareholders and this will definitely not work for a public company.
Can I setup an LLC by Myself?
Yes! You can definitely setup an LLC by yourself and you don't need a lawyer, CPA or anybody to help you do it. Now, remember that while parts of it are easy, some parts are hard, and overall the process must be completely exactly the right way. Anybody can mow their law, wash their car, clean their house, do their taxes, etc. But what we see is that millions of people pay other people for valuable services, and this may be one example where you are better off paying a professional to help you file your documents in your chose state. The only state that requires the intervention of another person is the State of South Carolina which requires the signature of an attorney before you can file. If you complete the paperwork, you can have it reviewed by an appropriate attorney that you know and this will be OK.
Can you form an LLC Online?
Yes! Many states have the ability to file online, and many even will tell your immediately if your filing is approved. In general, the filing process will cost exactly the same if you file online or in paper. In some states, this will save you a lot of precious time, in that you aren't required to mail anything to the office, nor are you required to wait for processing times. In the State of California, and like many other states, there isn't a method where you can file online. Even though California is one of the bigger states in the U.S., they are behind other states in this regard.
How many people do you need to form an LLC?
You need only 1 person to file an LLC, or one organization. Remeber from our comments above, that a person under 18 cannot form an LLC in many states, and it isn't best for a person under 18 to be the only owner. You can also have it formed by one organization, one foreigner, or one other entity like another corporation. The LLC structure has a lot of flexibility in the filing requirements, so you can definitely file on your own.