An LLC is a legal business structure that offers limited liability protection and pass-through taxation benefits. Like a corporation, the LLC is a separate entity from its owners.
Forming an LLC does not require the use of a lawyer. You can form an LLC by filing Articles of Organization with your Secretary of State’s office or relevant department. However, a DIY approach isn’t always the best option when starting an LLC.
In this article, we explore why you may need to consult a lawyer or other professional to help you form an LLC.
What are the reasons for consulting an attorney?
Your choice of legal business entity depends on several factors. Things to consider include your need to limit personal liability, your desire to control the business, and your tax situation.
Each legal business structure has advantages and disadvantages, a legal professional can help you evaluate the pros and cons as they pertain to your business goals. They can also help you draft an operational agreement for your LLC and guide you on how to establish ownership interest.
Consulting an attorney is also recommended if your LLC comprises multiple people or partners, has complex assets, or is seeking institutional financing.
What are the reasons for using a service provider?
A service provider can be an economical and streamlined option for forming an LLC. DIY filing can be fraught with errors, so it's a good idea to hire a service provider who has experience in LLC filing to ensure that everything is handled correctly. They can also help with other LLC requirements such as obtaining a registered agent or determining your business license and permit needs.
In terms of LLC formation services, choose a provider who has experience ensuring accurate and timely services and can provide answers and guidance to explain your options. Additionally, the company should guarantee their services against filing errors.
Should I consult with an accountant about forming my LLC?
If you have questions about the financial and tax accounting structures your new business will need to succeed, consider consulting an accountant. A CPA can explain the differences in tax treatment between an LLC, corporation, and a sole proprietorship, or if your LLC might want to choose an S corporation tax status. A CPA can also advise you on your tax responsibilities, such as payroll and other employer-related tax requirements.
Are there any restrictions on who can form an LLC?
Typically, anyone can start an LLC, regardless of residency or legal restrictions. There are a few states, however, that require members and/or managers to be at least 18 years old.
What are the steps to forming an LLC?
There are seven basic steps to forming an LLC:
- Select a formation state: Most LLC owners form their company in the state in which they plan to operate, but there may be times when you should consider forming your LLC in another state.
- Determine your LLC’s name: Follow state laws about which names are acceptable for your LLC.
- Appoint a registered agent: An LLC must have a registered agent to receive important legal notices and tax documents on behalf of an LLC.
- Prepare an operating agreement: An LLC operating agreement (or LLC agreement) is a key document that establishes the rules and structure for your LLC and can help address any issues that arise during business operations.
- File LLC formation documents: These must be filed with your formation state.
- Obtain an EIN: An EIN or Employer Identification Number can be obtained from the IRS.
- Open a business bank account: Having a separate account to your personal bank account can help avoid piercing the corporate veil and losing your limited liability.
- If needed: Register to do business in other states.
For more information, read How to form an LLC.
More questions about LLCs?
To help you decide which business structure is best for you, try BizFilings’ Incorporation Wizard Tool.
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