As the owner of a business, it is important to ensure that all incorporating documents and legal requirements are in order. One way to structure a business is to create a Limited Liability Company (LLC), as it is considered to be the least complex way to form a business and more flexible than other types of corporations. By definition, an LLC prevents the members of the company from being held personally liable for the debts and liabilities of the company. Essentially, this means that the personal assets of the company’s owners are kept separate from the assets of the company and the company’s owners do not have to pay the debts or liabilities of the company from their personal bank accounts.
Forming an LLC is best suited for those who go into business with more than one owner who would like certain liability protections. It provides legal protection against business debts and other obligations. In addition, it allows the business to avoid filing a corporate tax return, and instead requires that owners simply report their personal profits and losses from the business on their individual tax returns. Furthermore, an LLC does not require that you be a U.S. citizen or permanent resident to be an owner.
While structuring your business as an LLC can be less complicated and provide legal protection, there are certain downfalls that may not make it the best option for your business. One of the most notable disadvantages an LLC poses is that, when one member dies or declares bankruptcy, the LLC must be dissolved. Other regulations that may hinder your business operations as an LLC include:
- LLCs cannot be sold as shares of stock on an open market to investors, which may limit your business’ growth
- Profit from an LLC may be subject to a self-employment tax when filing your tax returns
What may make an LLC more complicated is that each state has different regulations regarding LLCs, which can become a problem if you have business locations in multiple states.
How do I Create an LLC?
Creating an LLC requires that you first choose a legal name and file the Articles of Incorporation with the Secretary of State. You may then need to apply for a business license and obtain any other licenses or certificates required for the specific industry in which your business operates. In addition, you will need to obtain an Employer Identification Number from the IRS.
Because the regulations and requirements for forming LLCs can be complex and differ from state to state, it is important to contact an experienced corporate lawyer to help you file the necessary paperwork and meet the specific requirements. The Brooklyn and Long Island corporate and commercial lawyers at Wingate, Kearney & Cullen, LLP have successfully guided their clients through the creation of business entities, including limited liability companies, and have handled many other corporate matters on behalf of their clients. For more information or to schedule a consultation, call (718) 852-5900.