An LLC (limited liability company) like Etison LLC is a popular way for business owners to limit their exposure to company debts. It is a totally separate entity from its owners (or members as they are known), and as such, owners are not held directly liable or responsible for any debts the business incurs. This is just like CLICKFUNNELS Trademark Of Etison LLC.
A Limited Liability Company is usually simpler to set up and generally less stringent in its reporting requirements than a corporation.
LLCs are “pass-through” entities, meaning that any profits or losses are “passed through” to you as an owner and are treated as personal income and taxed accordingly. The importance of this is that earnings are not taxed twice, first by the company and then by you personally.
What are the benefits of an LLC?
The advantages of forming an LLC rather than operating as a sole proprietor, general partnership or corporation offers these main benefits:
• Personal Limited Liability.
The members of an LLC (which are the owners) are protected from personal liability for acts conducted by the company and other members. Creditors cannot pursue any personal assets (bank accounts, property, etc.) of any owner of the LLC to settle company debts.
• Pass-through taxes.
Unlike a C corporation which can be double-taxed, at the corporate level and by the owners, the profits from a Limited Liability Company are passed directly to the owners and are reported on their personal tax returns, so the company’s earnings are taxed only once.
An LLC is simple to set up and keep going, with not much paperwork, and minimal requirements with regards to officers, annual meetings or elaborate records, plus any set-up costs incurred during the formation can be tax-deductible.
You can also choose which method of taxation is best for you, cash or accrual method of accounting. The majority of LLCs tend to opt for the cash method because income is not recorded until it is received.
• Flexible Structure.
Your company can be a single-member or multi-member LLC, a member-managed or manager-managed LLC. Members can be any of the following; individuals, partnerships, trusts, or corporations, and no limit is set on the number of members an LLC can have.
• Flexibility in profit distribution.
LLC members can receive distributions from the company’s earnings based on their ownership percentage and as per the terms of the company’s operating agreement. Since members must report any profit or loss on their personal tax return, if members receive a distribution from income on which they have already paid tax, then it is not taxed a second time. You can learn more about the company that goes by Etison LLC.
How do you form an LLC?
Forming an LLC requires paperwork to be filed with the Secretary of State or similar government body that monitors new and established businesses in whichever state your business will operate.
Every state has rules and procedures for forming an LLC, so it would be wise to find out what your state’s requirements are before going too far. However, no matter where you live, there are a number of steps to follow that are common to all states.
• Select a name for your LLC.
Any name you choose must include the words “limited liability company” or abbreviated to “LLC or L.L.C.” and cannot include anything that would indicate any connection to a government department or agency (FBI, CIA, Treasury, etc.)
Most states will not allow you to choose a name for your company if that name already exists or if it is too similar to an existing LLC. Similarly, you will not be allowed to use words that could mislead the public into believing the company supplies something it doesn’t.
Search online with your state’s division of corporations, or Secretary of State’s office to see if your chosen name is available before filing any paperwork. As well as any state restrictions, check to see if there are businesses close by with similar names.
• Name a Registered Agent.
Practically every state requires that an LLC must have a registered agent. In some states this is called a statutory agent, but in all cases it is a person who will receive any legal documents, or any other official paperwork sent to the company.
It can be anyone over the age of 18, including a member of the LLC, but who must be a resident in the state in which you operate. If you cannot find anyone who is willing to serve as the registered agent, then there are companies that will provide the services of a registered agent for an annual fee.
• Prepare an Operating Agreement.
The first thing you should prepare is the Operating Agreement of the LLC. This document describes the running of the business. It specifically mandates ownership and voting rights of the members, how any profits or losses should be allocated, how and when any meetings will be held, the rights of members to pass on their interest in the company, and how the company will be dissolved in the event of going out of business. Or you can try to visit their Facebook page.
This document is not normally a state filing requirement, but check with your state’s laws and regulations. It is, however, prudent to have this prepared so that all concerned know their rights and duties thereby alleviating any future disputes.
• Register the company with your state.
Each state will have their own forms and ways of filing a new limited liability company, but generally the basic information required is the same. You will have to file articles of organization, which can be done online or downloaded, completed and mailed to the state along with the correct filing fee.
The articles of organization will, at a minimum list such items as:
- The name of the business, which must include; Limited Liability Company, LLC or L.L.C.
- The street address of the principal place of business.
- The mailing address – if different from the business address.
- Name and address of the registered agent, who, generally, must sign the filing application. (If filing online, then digital electronic signatures are accepted.)
- List the name and address of each manager or representative authorized to manage and control the company. (This information is required to open most bank accounts and to obtain workers’ comp exemption.)
Your state may have additional information requirements, but on the whole, registering a new LLC with the state is fairly straightforward.
All states will charge a fee for filing, but the amount varies from state to state.
• Get your Certificate from the state.
Once your company formation documents are filed and are approved by the state, you will be issued a certificate or other documentation that ratifies your limited liability company. If you file online, you will receive an email confirming the filing has been accepted, and you should be able to download everything required to enable you commence business.
• Obtain an EIN/Federal Tax ID.
An EIN, or employer identification number, is akin to a social security number for your company. It is required to open bank accounts and to hire employees. It is free and simple to obtain from the IRS. The online application, form SS-4, walks you through the application procedure, answering a few simple questions, and if everything is in order, you will be issued with your EIN.
• File in other states.
If your LLC is likely to conduct business in states apart from your own, then you should make sure that it is eligible to trade in other states. This is known as “foreign qualification” and you should get familiar with the requirements of each state in which you intend to trade. If you follow their individual rules you will be able to trade within their laws.
What are your next steps?
Once you have named, filed and registered your company, there are a couple of things still to be done to get the LLC fully operational.
Open Bank Account(s)
Having a separate bank account for your LLC is not only a legal requirement, but it makes sense to keep business and personal transactions detached from each other. After you decide which type of bank account is best suited for the business, what information does the bank need?
The bank will generally request the following documents:
- A copy of the Articles of Organization, or equivalent paperwork.
- The EIN or federal taxpayer identification number. You can always provide a copy of your SS-4 form.
- A copy of the operating agreement showing the names of the authorized signers of the bank account.
There may be other documents needed by your chosen bank, so it is best to contact them to find you what is required to save a wasted trip.
Taxes and Insurance.
If necessary, ensure you register the company for state taxes. If you are selling products, you will have to apply for sales and use tax, obtaining the required tax ID number and certificate. If there are going to be employees, you will need to register with your state for unemployment insurance and federal withholding taxes.
Forming an LLC is not complicated, but it isn’t trouble-free, either. As long as you get to know your state’s requirements, and follow their instructions, you should have no problems.
If, on the other hand, you have doubts about doing it yourself, companies are available who, for a modest charge plus state filing fees, will do all the paperwork, file everything with the state, and once all the documents have been approved, mail you a complete LLC package.e