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What is an LLC and Do You Need One to Run Your Business?
If you are considering starting your own business, one of the key decisions you will need to make is whether or not to form an LLC. An LLC, or limited liability company, is a type of business structure that offers certain protections to its owners (known as members) should the company incur any debts or other liabilities. In addition, forming an LLC helps to distinguish your business from your personal property and assets.
Steps to Form an LLC
Forming an LLC for your business is a fairly straightforward process. Below are the basic steps you need to take to form an LLC.
- Choose a business name – Your LLC business name must meet certain state requirements. This usually means that your business name must include the words, Limited Liability Company, a corresponding abbreviation, or the initials of your LLC.
- Choose a registered agent – A registered agent is someone responsible for receiving any legal documents the court might send your business.
- File the LLC formation documents – This means filing the Articles of Organization or Certificate of Formation with the appropriate agency or department in your state.
- Create an LLC operating agreement – This document is optional but highly recommended. This outlines the responsibilities and rights of LLC members, as well as how the company will be run.
- Obtain business licenses and permits – This depends on your state, as well as your type of business. Licensing laws vary from state to state, so check with your local government to find out what licenses and permits you need.
- Apply for an EIN (Employer Identification Number) – You will need to provide an EIN from the IRS to open a business bank account.
FAQ
Q: What is the difference between an LLC and a corporation?
A: The main difference between an LLC and a corporation is limited liability. With an LLC, members are generally not liable for the debts and liabilities of the LLC. With a corporation, shareholders are generally not liable for the debts of the corporation, though some jurisdictions provide protections for shareholders if the corporation fails. Additionally, a corporation is required to issue shares of stock to its owners, while an LLC is not.
Q: Do I need an attorney to form an LLC?
A: No, you typically do not need an attorney to form an LLC. However, you may benefit from having an attorney review your LLC documents and provide you with legal advice. Additionally, an attorney can help you navigate the laws and procedures associated with forming an LLC in your state. Consulting with an experienced attorney is the best way to ensure that your business is legally and properly structured to meet all applicable laws.
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