Forming an LLC

At some point in your business planning you must decide if you will incorporate your business or form an LLC. We will focus on forming an LLC corporation because it is the business legal structure which seems to fit well with moms for starting own business and it is popular with small business owners because the LLC is designed to overcome the limitations of other forms of businesses.  As you explore you should incorporate LLC into your plans to learn if it fits your needs. Many people are not aware of the aspects of LLC formation.

We will also briefly discus the other entity forms. Remember, this information should never substitute for sound legal advice from your attorney.  This is intended to be informative only.

You will encounter this entity as listed as LLC, Limited Liability Company, LLC Corporation or Limited Liability Corporation.  Essentially the LLC is structured to allow its owner or owners to pay business taxes on their individual income tax returns as partners or a sole proprietorship.  It also gives the owners the legal protection of personal limited liability for business debts or legal judgments. You’ll want to protect your personal assets.  Discuss the benefits of forming LLC along with all other options with your CPA. 

You should thoroughly explore your options because choosing the wrong business structure can result in higher taxes and excessive paperwork.

For your consideration: These are the entities that have "Inc." following their name.

The C Corporation- no personal liability to shareholders, taxed on earnings at a corporate level, board of directors has overall management responsibility, officers have day-to-day responsibility. The profits of a C corporation are subject to potential double taxation.

The S Corporation- no personal liability to shareholders, there is no corporate level income tax, may have only one class of stocks, generally, an S corporation is exempt from federal income tax other than tax on certain capital gains and passive income.

Your attorney and CPA should thoroughly explain each entity and help you decide which best fits your business.