For the entrepreneurial spirit, forming and cultivating a successful business is often a dream. This goal, however, is obviously much more complicated than posting a sign on a door that says "open." There are numerous elements that need to be taken into consideration, including what type of business one wants to create. One of these types is the limited liability company.
An LLC does not exist as a separate entity. Instead, the losses and profits are reported on the tax returns of the "members" of the company. The members of an LLC can be a range of different people or entities, from a single owner to other LLCs.
Before any profits or losses are reported, however, many steps need to be taken in order to ensure an LLC is correctly and legally created. Every state has differences in how this must be done, but there are some general guidelines that carry over. Choosing a name may seem like a no-brainer, but there are limitations on word usage and, of course, it must not be already taken by another LLC. After choosing a name, the articles of organization must be filed (in most states) with the secretary of state. This document outlines the name, address, list of members and other simple information regarding your LLC.
These are only the most basic steps that must be followed when creating an LLC. In future posts, we will further examine the necessary steps for business formation. This may seem like a stressful operation, and it sometimes is, but seeking the assistance of an experienced attorney can help iron out details and ensure all the correct rules are being followed.
Source: U.S. Small Business Administration, "Limited Liability Company," accessed May 8, 2015