What is a Limited Liability Company (LLC)?
A limited liability company is a type of business entity that is independent of its owner. It can consist of one or more members which may be individuals, partnerships, limited partnerships, trusts, estates, associations, corporations, other limited liability companies or other business entities. The members of a limited liability company are afforded limited liability similar to shareholders of a corporation and are allowed pass-through taxation that is comparable to a partnership.
Return to top
What are the advantages of forming an LLC?
A Limited Liability Company combines the advantages of a corporation and a partnership. The members of the LLC are allowed limited liability protection of a corporation with the pass-through taxation of a partnership. All personal assets of the members are protected from creditors for debt and from judgments against the LLC. Provided a member did not use their personal assets to secure loans or personally guarantee the debt. Unlike a Sub-Chapter S Corporation whose shareholders are limited to 75, there is no limit to how many members an LLC can have. For the flexibility and taxation benefits, LLC’s have become very desirable to business owners.
Return to top
Are there any disadvantages?
There is generally more paperwork and filing requirements to create an LLC than a general partnership. In many states, general partnerships do not have to be filed with the state filing agency. More often, general partnership documents are filed at the Recorder’s Office in the County of residence or place of business.
Unlike a corporation whose existence is perpetual, many states require an LLC to designate a dissolution date in the formation document.
In some states, when a member dies, resigns, is expelled or files for bankruptcy, the LLC is dissolved or less otherwise stated in their Articles of Organization or Operating agreement. It is often possible for the majority of members to have a vote to continue the LLC as long as the vote takes place within a short time frame; generally 90 days. Most often, the state agency will allow you to amend the dissolution date at a future time if you are so inclined.
Although LLC’s are a fast growing business entity, there is still a lack of wide spread acceptance of an LLC.
Depending upon the state, there can be restrictions on rendering professional services. In California, an LLC is forbidden to provide any service that requires a professional state license.
Return to top
How do I decide if I should form an LLC or S corporation?
Most business owners that decide to form a limited liability company do so because of its flexibility in taxation. An S corporation eliminates double taxation but it lacks the flexibility of an LLC in distribution of income to the owners.
A limited liability company can have several classes of membership interests and can consist of one or more members (in most states) which may be individuals, partnerships, limited partnerships, trusts, estates, associations, corporations, foreign nationals, other limited liability companies or other business entities.
An S corporation can only be owned by individuals, issue only one type of stock, and is limited to no more then 75 shareholders.
In California, professional LLC’s are not allowed. By forming an S corporation, you can offer services that require a state license with the benefits of pass-through taxation.
In most states, the filing fees are less to form an LLC than an S corporation.
Return to top
Where should I form my LLC?
It often makes the most financial sense to organize your LLC in the state you are doing business in. Some states offer lower formation fees or have flexible laws that are favorable to business like Delaware. Keep in mind that if you form an LLC in a state other than the one you are doing business in, you will be required to qualify to do business in your home state. In a nut shell, this means that you will have to pay two initial filing fees, pay two Registered Agent fees, file two annual reports, and in some states; pay two state tax fees.
There are some instances when it may be beneficial to form an LLC in another state instead of in your home state. If the LLC is going to be a holding company for investments, it may make sense to form in Nevada because it does not have a state income tax.
If you have decided to conduct business in more than one state, you will be required to qualify “register” to do business in each state. Sun Corporate Filings, LLC can assist you by forming your LLC in the state of your choice and then qualify your LLC to do business in your home state. Please contact us for further information and pricing.
Return to top
Who controls or manages an LLC?
An LLC is owned and organized by its members. Members to an LLC are the equivalent as partners are to a partnership or shareholders in a corporation. Members have the option of managing the LLC themselves or if they prefer, they can choose to elect managers to operate the LLC. Managers are agents of the company and have the authority to bind the company to third parties. The flexibility in management is one of the reasons LLC’s are so appealing.
Return to top
How many entities or people are required to form an LLC?
In most states, only one entity or one person is required to form an LLC. In terms of taxation, the IRS does recognize single member LLC’s and allows pass-through taxation. Although the Internal Revenue Service allows one member LLC’s with pass-through taxation, some states may not afford equal treatment to single member LLC’s. To avoid any surprises, we recommend that you speak with your accountant or tax preparer to find out how the tax laws in your state would affect your single member LLC prior to organization.
Return to top
What titles are allowed in an LLC?
In some States, officers of an LLC are limited to members, managers, and Chief Executive Officers (in California). Other States allow offices such as President, Vice-President, and other titles that are generally afforded to corporations.
Return to top
Are there any restrictions on how I name my LLC?
Yes there is. Most states require that the LLC contain the words limited liability company or limited company or end with the abbreviation LLC, L.L.C., L.C. OR LC.
Most states do not allow a limited liability name to contain the words: bank, trust, trustee, incorporated, inc., corporation, corp., insurer, insurance, or Olympic(s).
In addition to the ending, most states will not allow you to register your LLC if the name is exact or "likely to mislead the public or which is the same as, or resembles so closely as to tend to deceive," the name of a domestic or foreign (out-of-state or country) limited liability company. Sun Corporate Filings, LLC will check the name availability with the State filing agency prior to submitting your documents.
Return to top
What is a Registered Agent or Agent for Service of Process and why is it required?
A registered agent is typically an individual, business entity, or in some states - a corporation that has filed additional paperwork with the state filing agency so they can become a registered agent. If your LLC is ever involved in a lawsuit, the plaintiff’s attorney and or the court, will serve your LLC via a process server to inform you of the suit. Even though an LLC is a separate entity, it can not answer the door and physically accept the court document in its hand. Therefore, state filing agencies require that an LLC designates a Registered Agent. The state filing agency requires that the Registered Agent maintains a physical address (no P.O. Boxes or PMB’s) in the state the company is doing business in. The Registered Agent is also required to be available at the physical address Monday through Friday during normal business hours to accept service of process. The name and address of the Registered Agent will become public record that anybody can access. Sun Corporate Filings, LLC can eliminate all of the above concerns. For a small annual fee, Sun Corporate Filings, LLC will appoint a Registered Agent to act on your company’s behalf. The Registered Agent will take on the responsibility of being served and forward all service of process to your company immediately. For more information, please click here.
Return to top
Do I need an attorney to form my LLC?
Legally it is not required. Sun Corporate Filings, LLC can draft, sign as Organizer, and file your documents with the State filing agency. We can also provide your LLC with Registered Agent services, prepare a general operating agreement, and provide you with an LLC kit to keep and maintain your records. We are able to provide all these services at a fraction of the price an attorney would charge. In fact, many attorneys turn to Sun Corporate Filings, LLC to provide them with filing services. We have been trusted in the legal community for over five years to competently organize new LLC’s on behalf of their clients.
However, if you have particular questions about how the laws in your state will affect your LLC, we do recommend that you speak to a competent attorney to answer your legal questions.
Return to top
What is a publication requirement and are there publication requirements for an LLC?
Some states require that the company publish information about their formation or qualification in a widely circulated newspaper within the county of the State they are doing business in. Currently, the only states that require limited liability companies to publish are Arizona, Nebraska, and New York. Sun Corporate Filings, LLC can help your company meet its filing requirements in Arizona and Nebraska for an additional service fee. Unfortunately, due to regulations and high costs, Sun Corporate Filings, LLC does not help with publication in New York. Please contact us if you are interested in this service.
Return to top
How is an LLC taxed?
At the federal level
An LLC may be classified for Federal income tax purposes as a sole proprietorship (referred to as an entity to be disregarded as separate from its owner), partnership or a corporation. If the LLC has only one owner, it will automatically be considered to be a sole proprietorship (referred to as an entity to be disregarded as separate from its owner), unless an election is made to be treated as a corporation. If the LLC has two or more owners, it will automatically be considered to be a partnership unless an election is made to be treated as a corporation. If the LLC does not elect its classification, a default classification of partnership (multi-member LLC) or sole proprietorship (single member LLC) will apply.
At the state level
Your LLC may be treated differently for tax purposes then at the federal level. Some states impose an annual tax or attach an additional tax depending upon your LLC’s gross receipts. In California, the Franchise Tax Board imposes an $800.00 minimum tax that is due within 3 months after formation. In addition, the LLC will be required to pay the minimum tax every year for the life of the LLC.
Since each state is different, we recommend that you speak to your accountant or tax preparer for specific tax questions.
Return to top
I have decided to form a limited liability company. How long will it take SCF to process my order? What is the procedure? Can I get started right away?
1) Go to our order page and click on Requirements to find out exactly the type of information you will need in order to proceed.
2) Choose a service package depending upon your needs. Click on each package to see what is included. Feel free to ask questions about our packages.
3) View the additional Products and click for more information.
4) Place your order online. All transactions are secure.
When SCF receives your order during the business week, it will be processed within 24 business hours or less.
1) We verify that you have provided all the information that we requested. We will contact you if anything is missing or incorrect. Please make sure you give us an e-mail address that is checked often or a phone number that you can be reached. If we cannot reach you, your order will be slowed.
2) We check name availability with the state filing agency (available in most states).
3) We draft your document, prepare all required copies and checks.
4) If you have chosen the Standard Package, we will send your document directly to the state for filing. If you have purchased the Federal Express option to and from the state filing agency, your document will be sent via Federal Express. Otherwise, it will be send via first class mail.
5) If you have chosen the Standard Express Package, we will either utilize an expedited service that the state agency provides or if unavailable, we will send your document to a courier service. They will hand walk your document to the state filing agency for filing. You will have the option to buy an expedited package. You will notice the state turnaround times next to each package. For example, the Delaware Secretary of State takes an average of 40 business days to process non rush orders. If you purchase the Standard Expedite package, the Delaware Secretary of State takes an average of 7 business days to process a rush order. This time frame does not include the first 24 hours of order processing, mail time (to and from the Secretary of State), or any additional services you have ordered. The turnaround times mentioned ONLY apply to how long the Secretary of State will take to process your document. Please contact us with any questions you may have regarding turnaround times.
6) Once your document has been filed and it has been received back in our office, we will scan a copy of the document for you to view online. Simply go to check order status.
7) We will begin processing any additional items you have purchased. For example: if you have ordered the EIN form preparation, we begin processing the document within 24 business hours. Once completed, we will scan the document online for you to view under check order status. Then we will return all your documentation back to you using the method you have chosen.
8) If you have ordered an LLC Kit, due to custom work, you will receive your customized kit under separate cover in 3-5 business days.
9) All documents will be returned via Federal Express, 2nd day air. You will have the option to upgrade up to Priority overnight for an additional fee.
FAQ: Why am I required to pay for Federal Express? Other incorporation service companies send the final package using First Class mail and it is free. Please explain.
Answer:
1) Federal Express guarantees delivery on the 2nd business day. We want to make sure you receive your document fast so you can start your business.
2) After spending your money on our services and state fees, it would be a tragedy if we sent your final package via First class mail and it was lost by the postal service.
3) FedEx generates a tracking number that would allow you to track the package. You could verify when we sent the package to you and you can make sure you are available for delivery. If we used First class mail, we could not prove that we sent your document to you.
4) FedEx provides proof of delivery that ensures us that you received your document. If we used First class mail, there is no proof of delivery and if you did not receive the package, you could not prove that it never arrived.
5) Although rare, if FedEx lost your package, it would be insured up to $100.00. First Class mail offers no insurance.
6) Our Merchant Services Provider requires that we provide proof of delivery for any services purchased using your credit card.
In a nutshell, FedEx protects you as the consumer and Sun Corporate Filings, LLC. Feel free to contact us with any questions.
Return to top
Sun Corporate Filings, LLC always suggests that you seek the advice of a competent attorney or accountant to answer any legal or tax questions you may have.