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Starting a limited liability company (LLC) is an exciting but nerve-wracking adventure. Our small business legal expert Sally Jones breaks things down into laymen’s terms for you.
One of the most important items you’ll need to address is finalizing the legality of your new venture. Navigating the necessary documents and other confusing requirements can be a chore, but which is why it’s nice to be in the 21st century where the whole process can be done online.
First, we’ll give you some background information about the benefits of an LLC and what you need to do to form an LLC if you’re still not sure which type of business to create.
- LLCs 101 (With Pros And Cons)
- How Can I Form An LLC (And How Much Will It Cost)?
- Can I Form An LLC Online?
- Who’s The Best Online Legal Service Provider?
The U.S. Small Business Administration defines a limited liability company (LLC) as
a hybrid type of legal structure that provides the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership.
Members of an LLC (the owners) can be a single individual, two or more people, other LLCs or even corporations. However, membership varies by state, so be sure to check your state laws.
The government doesn’t tax LLCs as separate business entities like they do with shareholders in a corporation. Instead, all of the LLC’s profits and losses are “passed through” to each LLC member. Members report these profits and losses on their personal federal tax returns (similar to a partnership).
What Are the Benefits Of An LLC?
So, why choose to create an LLC? There are certain advantages to an LLC, including:
- Limited Liability – As an LLC member, you have legal protection from personal liability for many of the business’s operations. If your LLC incurs debt or gets sued, for example, your personal assets are usually exempt. But be advised that this is limited liability. You don’t necessarily get legal protection from wrongful acts, including actions your employees may take.
- Time and Cost Savings – One of the greatest benefits of an LLC is operational ease. An LLC involves less record-keeping and lower start-up costs compared to an S-Corporation.
- Profit Sharing – LLCs aren’t as regulated with the distribution of profits as other legal structures are. It’s largely up to you and your fellow members to determine who has earned what percentage of the profits or losses.
Are There Downsides To An LLC?
- Limited Life – Many states require an LLC to dissolve if a member leaves the LLC, leaving you with all the legal and business ramifications to close your business. However, you can include provisions in your LLC operating agreement to keep the LLC alive if a member leaves.
- Self-Employment Taxes – As an LLC member, you’re legally considered self-employed and must pay self-employment tax contributions towards Social Security and Medicare. The LLC’s entire net income is subject to this tax.
Although some details vary by state, the following general requirements apply to all LLCs:
Choose a Business Name – You must follow three rules regarding your LLC name: (1) it must differ from an existing LLC in your state, (2) your name must include that it’s an LLC, and (3) it can’t include certain words restricted by your state, such as “insurance” or “bank.” When you register your business with your state, your business name automatically gets registered.
File the Articles of Organization – An “articles of organization” is a simple document that includes your business name, names of your LLC’s members, address, and other necessary information. In most states, you file with the Secretary of State. But check your state requirements as filing location can differ from state to state.
Create an Operating Agreement – Although not required by many states, an operating agreement is an essential part of most LLCs. This agreement structures your finances, rules and regulations for your business. For a multi-member LLC, an operating agreement spells out the allocation of profits and losses, the percentage of interests, members’ responsibilities and other provisions.
Obtain Licenses and Permits – Once you register your business, you’re required to obtain certain federal and state business licenses and permits. Requirements vary by your industry, state and locality. Check with your state’s business filing office to know which licenses and permits you’re required to obtain.
Announce Your Business – Some states require the added step of publishing an announcement about your LLC formation in your local newspaper. Check with your state’s business filing office to see if this is a requirement.
How Much Does It Cost To Form An LLC?
Typical costs to create an LLC include:
- State filing fees can run anywhere from $50 to $1,000 or more, depending on your state.
- Attorney fees to form a simple LLC range from $500 to $3,000. Attorney costs can exceed $5,000 if you have a more complicated situation, i.e. multiple members, varying owner percentages, etc.
- A certified public accountant (CPA) can assist you in filling out the proper paperwork, although he can’t give you legal advice. Expect to pay a CPA anywhere from $500 to $1,000.
How can I save in start-up costs? Online legal services are an excellent option if you don’t want to budget for expensive attorneys or a CPA. They have licensed attorneys and tax professionals on staff but are able to offer legal services at a discount because of their low overhead and automated offering.
Creating an LLC online can save you hundreds and, in many cases, thousands of dollars. We recommend going through LegalZoom. Why? They are one of the most well known brand names when it comes to online legal services, and they’ve been around for years.
Customers rave about LegalZoom’s LLC services, and the process is as easy as it gets. The website prompts you through a series of questions, and it automatically inputs your answers into LegalZoom’s LLC Operating Agreement Template and Articles of Organization Template. The questionnaire takes only 10 or 15 minutes to complete.
What Are the Benefits of Using LegalZoom?
One of the benefits of using LegalZoom is the help you get along the way. Most questionnaire items include information about how a majority of people answer that question and a “learn more” link to help you make sure you’re answering correctly. If you get stuck, you always have the option of calling a customer support agent (they have generous hours of availability seven days per week). Check out the video below to get an overview of what to expect with LegalZoom.
Are LegalZoom’s LLC Services Worth It?
No matter which pricing package you choose for creating an LLC online with LegalZoom, we think it’s definitely worth it. Each package saves you the hassle of filing the necessary documents yourself. Below is a breakdown of LegalZoom LLC pricing. Each option includes the filing of LLC state documents, your personalized operating agreement, name availability check and business filing, and your financial account authorization letter.
+State Filing Fees
+State Filing Fees
+State Filing Fees
|Turnaround||30 Business Days||15 Business Days||7-10 Business Days|
|Company Seal & Binder|
|20 Customized Membership Certificates|
|Federal EIN Discounted & Expedited|
|30-Day Trial of Business Advantage Pro*|
*Business Advantage Pro includes attorney consultations, legal document review, exclusive discounts and more.
Do you need other online legal services? Check out our LegalZoom review to learn about all the legal services they offer. And if you’d like to see how LegalZoom compares to other online legal services, be sure to check out our online legal services comparison.
Are you considering forming your LLC online?
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