By: Esqueda Law PLLC
An in-depth review of LLC’s in 7 key pointers
Rather than having a broad overview of your business strategy, it is ideal to have an understanding of the basic operations and requirements for successfully running your business. With a Limited liability company, as an individual, or even in a partnership, you may run your business without the risk of personal liability and double taxation as either a sole proprietorship or large corporation may, respectively. Some of the day to day operations, or annual requirements of your LLC, are explained in depth here, to give you a deeper understanding of how LLCs really work.
Here are 7 key pointers to a more in–depth understanding of how an LLC works:
- Ownership and Membership. You may own your business solely or in partnership. Either way, the owners are also considered members. There is no stipulated title for the owners, but you do have the option of using common titles such as CEO, Manager, Director, etc. It is best to avoid titles like Proprietor and Corporate owner as these titles are misleading.
- Business Title. The name of your business should be thoroughly researched to ensure it is not infringing on any copyright names and any Trademark companies within your vicinity. When conducting company business, the title LLC at the end of the business name can help prevent you from personal taxation for business transactions
- How it is formed – Legal Documents Required. To form an LLC, the state in which you wish to operate and be registered in requires an Article or organization, an Operating Agreement, a list of members and their mailing addresses, financial records, and income tax returns. The legal documents can be formed using templates or may be tailored to suit your business needs by hiring a legal professional. Annual reports are signed with the state to keep an updated account of the business name and operating status. There may be a filing fee associated with this in some states
- Annual Meetings. For LLCs, annual meetings are not required, unless agreed upon in your operating agreement. This means there is no need for keeping minutes and records of meetings. Doing so is simply a good practice if you would like to document and maintain credibility.
- Investors. LLCs may receive funding from outside investors, crowdfunding initiatives, and loans. Where outside investors are sourced, federal and state laws must be adhered to. Whenever there are investors, they need to be informed of the risk that is involved. For example, if they gain membership from their investment, they will also be taxed on their own income statements for this.
- Liabilities and taxes. As a singular owner of an LLC, tax is passed through to your income statement. If more than one member owns an LLC, the taxes are passed through to the various members and are shared. This is, of course, if the members choose to be taxed that way. In an LLC, you have the choice of being taxed like a partnership or a corporation, in which corporate tax is paid on the net income of the business, and then members also pay tax on their dividends.
- Regular tasks and responsibilities. Meetings with members are not required though members should be kept up to date with occurrences. It is wise to find out the standard range for salaries in your field to avoid suspicion of fraud, or conflict with the IRS.
Before starting any business, such as an LLC, it is best to have a good understanding of how it operates. My name is Liza Ann Esqueda and I specialize in this field.
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