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LIMITED LIABILITY CO LLC
Tips For Small Business Owners
A limited liability company operates much like a partnership, but has the liability protection of incorporation. One advantage is that the LLC is easier to operate, the paperwork is less cumbersome, and formalities are less complex than with a corporation.
FORMING A LIMITED LIABILITY CO LLC
While it may be of value to consult with an attorney and accountant prior to forming a corporation, it is not required. If you have a reasonable grasp of business concepts, there is no reason why you cannot do it yourself.
Go online to your state corporation commission website and spend some time studying the frequently asked questions, and any other self help info listed on the sight.
Check Name Availability
Next, you should be able to check the name you have chosen for availability.
Remember, even if the name is available and you successfully file your documents under that name; do not start spending money on that name until you receive official notification from the state that your entity has been approved.
Most states allow for expedited filing (a week instead of a month) for a small extra fee. The cost of filing your documents depends on your state, but should be in the range of $50 to $350.
If you have decided which type of entity you wish to form, fill and copy, or download the necessary documents.
File Your LLC Application
In most cases you will need to go in person to your state corporation commission office. Of course you can also mail the documents.
Once your entity is approved and you receive your packet from your state, you will need to file a notice for publication in a newspaper of general, public circulation. The form for publication should be in your packet.
Follow Formalities For LLC
It is vitally important that you follow all formalities once you have formed your LLC. Should you ever be sued, the first thing the plaintiff’s attorneys will do is go through your corporate records to see if all formalities have been complied with and all procedures have been correctly followed. Even a small thing such as paying a personal bill from your corporate bank account could have disastrous consequences in the case of a law suit.
In the unfortunate event of a lawsuit, the plaintiff’s attorneys will go through your corporate records with a fine tooth comb. They will be attempting to “pierce the corporate veil”, i.e. prove that you have really been operating as a sole proprietor, and therefore, are not afforded the personal liability protection of the corporation (LLC).
Compliance With LLC Formalities Very Important
Do not underestimate the importance of compliance with the formalities of the LLC. This is your protection provided by the “corporate veil”. In event of a law suit, your opponent (the plaintiff) will attempt to pierce the veil, so do not neglect these formalities. Something a small as paying a personal bill from your corporate bank account can cause you problems.
The owners are members, and the duration of the LLC is determined when the organization paperwork is filed. Most states allow a perpetual duration (no end date). Be sure to check rules of state in which you are filing.
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CONTINUED TO: LLC Tax Strategies