As a business, there are a few legal structures that you can take advantage of. While entities such as sole proprietorships, partnerships and corporations are among the most common, another legal structure that you can have for your business is a Limited Liability Company or an LLC. With a limited liability company, you will be able to protect your personal assets and limit your overall liability in terms of lawsuits and bankruptcies. Like all other types of business entities, there is a process that you will need to undergo in order to make your business into a LLC. Once you make your business into a LLC, there are a number of benefits that you will be able to take advantage of.
Forming a LLC provides a type of business entity that features the simplicity of a sole proprietorship or partnership and the protections of a corporation. Therefore, it is among the most popular types of business entities. One of the benefits of a LLC is that it will take a short time to establish since there is just a few documents you need to file. It is not as complex as a corporation since you don’t need to provide information about stockholders or shareholders. A LLC will also provide you with a form of asset protection. Lastly, a LLC can give you some tax advantages as well. With all of these benefits, a LLC is a very wise choice when looking to form a business entity.
WHAT IS THE BENEFIT OF TURNING A BUSINESS INTO A LLC
There are many different benefits a business will find they receive once formed into a LLC. Some of the main ones are:
- Simplicity: A LLC is among the easiest types of business entities to start. You will just have to fill out applications for a business license and then file Articles of Organization to the state attorney general. Upon acceptance, your business will be officially recognized as a limited liability company. Therefore, the process is not nearly as complicated and time consuming as a corporation.
- Asset Protection: One of the main reason why many businesses form as a LLC is because it will provide them with a lot of legal protections. As a limited liability company, you will not have to worry about having to give up your personal assets in case you are unable to satisfy business debts. As long as the debts are in the LLC’s name, you the owner/member will not be liable to pay these back. A LLC will also benefit you in bankruptcy as a result since the business assets will be liquidated instead of the personal assets of the members.
- Tax Advantages: Another benefit of turning your business into a limited liability company is the tax advantages. Limited liability companies provide you with the benefits of owning your own business such as deducting business related expenses. You will be able to pay yourself a salary instead of paying taxes on your personal income. With tax advantages such as this, you will be able to save money as a business owner with an entity such as a limited liability company.
CHECKLIST: HOW TO BECOME A LLC
There are a few steps that you will need to take in order to make your business a limited liability company.
- Get a business license and EIN: The first step you will need to take in order to become a LLC is to make your business an officially recognized legal entity. To do this you will need to fill out an application for a business license and an employer identification number and submit it to your local city and state business and tax licensing department.
- Fill out and submit Articles of Organization: After getting a business license and a EIN, you will then need to fill out and submit a packet of documents known as the Articles of Organization. These are used to inform the state government about the owners or are also the members of the company. You will also have to provide information such as the name of the business, the type of business you want to make a limited liability company and also information pertaining to its regular activities such as meetings.
- Publish the LLC in a Local Publication: Once your application for the Articles of Organization are accepted, you will then be required to publish your LLC information in a local newspaper. It will be required to have the information published for three straight days. Once this is completed, then your business is officially recognized as a limited liability company.
QUESTIONS AND ANSWERS
Q: Why make a business a limited liability company?
A: It is a good idea to make your business a limited liability company because it will protect the owners/members from the costs of lawsuits and debts as well as saving money on the annual tax liability.
Q: Is making a business a LLC easier than a corporation?
A: Yes, a limited liability company is easier to organize compared to a corporation. With a LLC, you will just need to provide basic information about the business and its members. A corporation requires you to take notes of meetings as well as provide detailed information about all of the stock and shareholders of the organization.
Q: How much does it cost to become a LLC?
A: The cost of making your business a LLC is quite low compared to a corporation. You will likely just need to pay a fee of no more than $150.