Learning How To Start An Llc has become a popular option for many entrepreneurs. The time and cost associated with operating a sole proprietorship or corporation are too prohibitive. Many entrepreneurs are frustrated with the complexity of incorporating and conducting business. They then seek out an experienced attorney to help them establish an LLC. In this brief article, we'll look at some key features of starting a Limited Liability Company (LLC).
The Speed and Ease: Operating a sole proprietorship can be a slow and complicated process in terms of paperwork, licensing and permits. In many states, it is actually required that you separately obtain permits to operate a business as compared to an LLC which is completely separate. Luckily, forming and running an LLC is an easy and inexpensive process and among the reasons the government designed LLCs in 1977 to make it easier for small business owners to own and operate their own businesses. To begin and run an LLC, you simply pay a nominal fee, file the appropriate paperwork, apply for needed business licenses or permits from your state or county, and wait for approval. As mentioned above, most states allow you to immediately open an LLC.
Step 2: If your intention is to incorporate an existing company, finding the appropriate documentation for that formation may be the next step to take. For instance, if you are opening a cleaning service, the IRS will require you to obtain the forms necessary to incorporate as a sole proprietorship. Likewise, the SEC requires you to file a securities registration with the SEC before you can get started in the business. Similar requirements exist for limited liability companies (LLCs). The nice thing about the fact that an LLC does not have to file its own forms is that most lawyers will let you take advantage of this option and only help you with the forms you need when you get started.
How to Start an LLC - What You Need to Know About Forming Your Own Limited Liability Company
Step 3: Once you've determined which form(s) you need to file, find and hire a qualified registered agent. A registered agent is responsible for receiving all communications from you and route them to your company's general office. Your attorney can also be a registered agent and can forward all legal documents to the proper person(s) you have chosen to serve as your company's CPA, tax preparer, etc. Without this individual, your LLC cannot conduct business. Also, don't forget to get additional paperwork together in the form of additional registrations for your business, licensing, insurance, and other legal documents.
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Step 4: One of the most important keys to understanding how to start an llc is understanding that all states have passed some type of exemption that protects its citizens from being taxed on income they receive from their businesses. This is known as a "pass-through" fee. This means that your personal income is exempt from taxation, while your business structure is subjected to taxation. This is something you must learn and know if you want to properly protect yourself, your family, and your business from excessive taxation.
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Step 5: The final key to understanding how to start an LLC is to secure the appropriate permits. Every state has different rules about who can qualify for these permits. In general, if you wish to conduct business at all, you'll need to apply for business licenses. These licenses provide proof that you have a legitimate intent to conduct business, that you have a fixed location for conducting business, and that you have adequate parking space for your business needs.
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Step 6: You will probably need a tax attorney if you plan to incorporate as an LLC. To understand how to set up an LLC, an IRS website offers tax advice for people that own an LLC. You will likely need to hire a tax attorney if you decide to incorporate an LLC because incorporating an LLC can result in double taxation. In this case, your business bank account is also subject to double taxation.
Hopefully this article has given you some insights into how to start an LLC. Because LLCs are not subjected to the same corporate taxation as S corporations or other business forms, they are a good way to protect your personal asset protection. As always, it's best to consult a tax professional with questions regarding your personal assets and your use of pass-through entities when you begin to get serious about how to set up an LLC.
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