Jan 25 2010
The Pros of Forming Limited Liability Companies
The limited liability company was first introduced to the United States in Wyoming in the late 1970s. The positives of using the entity for small businesses quickly became apparent and resulted in a revolution of sorts when it comes to business entities.
The “LLC” is so heavily promoted because it seems to trump the cliché that you can’t have your cake and eat it to. Why? The LLC provides all the asset protection of a classic corporation, but does so without all the paperwork required to run a corporation. This makes the entity both a great shield against lawsuits and a minimum burden on the time of the business owner who, after all, is in the business of making money, not keeping corporate records! On top of all this, there are tax benefits that go along with an LLC.
So, just how easy is it to form this company? Well, let’s talk about creating a California LLC as an example. If you were going to be the sole owner of the company, called a member, you would check to see if the name you desired was available with the Secretary of State. If it is, you would then download the articles of organization form off their website, fill it out and send it in with payment. When approved, you would simply need to get an employer identification number from the IRS and open a bank account. That’s it. Practically speaking, you would want to get a corporate book and create an operating agreement, but it would not technically be required.
On a quick aside, there is often a lot of confusion about the difference between LLC and LLP business entities. The answer depends on what state you are in. Generally, however, the limited liability partnership is only available to licensed professionals such as lawyers, doctors, accountants and so on. Why? In many states, these professionals are not allowed to form LLCs.
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