What is an LLC?
In an LLC, owners have limited personal liability for the debts and actions of LLC, similar to a corporation. The benefits of pass-through taxation and flexibility, much like a partnership, make LLCs an attractive business structure.
An LLC is an entity created by state statute. A Limited Liability Company (LLC) is a type of business structure. LLCs are popular because, similar to a corporation, owners have limited personal liability for the debts and actions of the LLC. Other features of LLCs are more like a partnership, providing management flexibility and the benefit of pass-through taxation.
Owners of an LLC are called members. Since most states do not restrict ownership, members may include individuals, corporations, other LLCs and foreign entities. There is no maximum number of members. Most states also permit “single member” LLCs, those having only one owner.
A few types of businesses generally cannot be LLCs, such as banks and insurance companies. Check your state’s requirements and the federal tax regulations for further information. There are special rules for foreign LLCs.
How are LLCs taxed?
LLC are taxed differently based on their structure. The federal government does not recognize an LLC as a classification for federal tax purposes. An LLC business entity must file a corporation, partnership or sole proprietorship tax return.
The IRS uses tax entity classification, which allows the LLC to be taxed as a corporation, partnership, or sole proprietor, depending on elections made by the LLC and the number of members. An LLC is always classified under federal law as one of these types of taxable entities.
Electing an Entity Classification
Because the federal government does not recognize LLCs for federal taxation purposes, each LLC is classified differently depending on the LLCs structure. In some cases, the company can request how they would like to file the return. LLCs can only be classified as a corporation, partnership or sole proprietorship. Form 8832 is needed to classify your LLC.
Forming a Limited Liability Company (LLC)
In order to form an LLC a person must file the articles of incorporation, initial list of managers and members and pay for a business license. Also it is very important for an LLC to have an operating agreement. The operating agreement is not file with the state it is a drafted document that details how the company is owned, the members duties and responsibilities, the taxation of the company and other operating issues with the company.
What are the articles of incorporation?
The articles of incorporation list the LLC’s name, registered agent and names of the LLC’s managers and members.
What is a registered agent?
Persons wishing to file articles of organization in the State of Nevada must designate a person as a registered agent who resides or is located in this state. Every registered agent must have a street address in the state of Nevada for the service of process, and may have a separate Nevada mailing address, such as a post office box, which may be different from the street address.
What name can my LLC have?
The name must contain the words Limited-Liability Company, Limited Company or Limited or the abbreviations Ltd., L.L.C., LLC or LC . The word “company” may also be abbreviated. The name must be distinguishable from the name of a limited-liability company, limited partnership, limited-liability limited partnership, limited-liability partnership, business trust or corporation already on file in this office.
What is the initial list of manager or members?
Each limited-liability company organized under Nevada law must, on or before the last day of the first month after the filing of its articles of organization, and annually thereafter, file its list of officers, directors and registered agent. The initial list fee is $125.00.