We assist clients with all types of issues that arise in the operation of a business. This includes selection and formation of business entities, purchase or merger of businesses, employment matters, contracts, collections, succession planning, collections and business litigation.
Setting up a Limited Liability Company
If you’re thinking about creating an LLC or have been advised to get one, here is some information that may be helpful as you proceed.
LLC stands for Limited Liability Company. It’s a kind of business entity that allows you to protect yourself in case of a lawsuit or other financial disaster.
You’ll need to complete the Business Entity Formation Questionnaire. Once we have that information, we’ll meet to talk through details and customize your foundational documents. We’ll meet again to go through all of the documents so you can get your questions answered and feel confident that you understand the expectations for what occurs going in to your first year as an LLC. Looking forward to working with you!
Can One Person Have a Limited Liability Company?
An LLC is owned by Members. If one person sets up an LLC and owns 100% of the entity, it’s called a single-member LLC.
Whatever you put in to the LLC is an asset of the company, managed by the terms of the Operating Agreement. If you have a Revocable Living Trust, then you should name your trust as the Member of the LLC.
What Goes in a Limited Liability Company?
You must have something of value in the LLC. If you have a vacation or rental property, you deed the title to the LLC. In order to get the benefit of limited liability the LLC has to be adequately funded. That means that there has to be enough of value in the entity to cover any forseeable liabilities. If you set up an LLC for real property, there has to be enough equity to cover a lawsuit. If there isn’t sufficient equity or if the business has no real tangible assets, you should procure liability insurance in the name of the entity to cover any potential lawsuits.
The LLC should be treated as a business. You should have a separate bank account for the LLC. Pay yourself out of the business bank account but don’t commingle personal funds with the LLC business account.
Why is a Limited Liability Company Useful?
If you own a business or property in your individual name, as a sole proprietor or partner and someone slips and falls on the premises, you could get sued personally. That means the lawsuit will name you as the owner of the property and, regardless of the value of the property that may have caused the accident, 100% of everything you own could be used to pay a judgment against you. You could lose your home, your savings, everything you own.
If you properly create and manage an LLC instead, your liability for accidents that happen on the premises or harm that is a result of the actions of employees or owners can be limited to the amount of assets owned by the LLC. In the slip and fall example, if a client falls and hurts himself at My Business, LLC which owns one bank account for the business, the office with a small mortgage and some insurance, then the only assets subject to the judgment are the bank account, equity in the office space and the insurance. Your home and savings accounts are safe!
Will I Have to Pay Taxes?
Generally, income from an LLC is subject to “flow through” taxation, meaning it’s taxed at the same rate as your ordinary income without any added tax. Single member LLC’s may not even need a separate schedule on their return. Two members or more use a partnership schedule that’s relatively simple to prepare.
An LLC can elect to be treated as an S-Corporation. Discuss this with your CPA.
What is Included in Setting Up a Limited Liability Company?
- Getting a separate tax ID number from the IRS if you don’t already have one.
- Researching and complying with all city, county and state requirements including filing exemptions or procuring a business license if necessary.
- Advice on insurance and how to own it so that it covers your entity. I’ll work with your insurance carrier to ensure your LLC is a covered entity if you already have insurance. We’ll discuss the advisability of key-person insurance or insurance to effectuate a buy-out.
- Filing Articles with the Secretary of State. This will cost your company $100 per year to maintain. If you have a dba already we can use that name if you wish.
- Planning your Buy-Sell Agreement and what happens if one of you is incapacitated or dies. We’ll include a customized Buy-Sell agreement.
- We’ll include an Operating Agreement with details of how the LLC will be managed on a daily and yearly basis.
- You’ll get an LLC Owners Guide with information on how to manage your new LLC. This is especially important for new LLC Members. If an LLC is not properly managed, it loses the liability limitation (called “piercing the corporate veil”). You’re making an investment in protection. Make sure you derive the greatest benefit from your new LLC and don’t inadvertently expose yourself to financial risks.
- You can call me with questions about managing your LLC at any time for up to 30 minutes within the first 90 days, at no additional charge.
There is a flat fee of $1500 for the above documents. You’re also receive our Business Maintenance Program: once a year, at the time your LLC is due for renewal, you can hold your yearly meeting at our office, we’ll make sure your LLC is updated with the Secretary of State, record any corporate minutes, discuss and document changes from the past year and strategize for the upcoming year. Depending on the complexity of your business, our Maintenance Program is $500-$1000 per year.