John Knight - LLC: LLC Quick start guide - A beginners guide to Limited liability companies, and starting a business

LLC

LLC Quick start guide A beginners guide to Limited liability companies, and starting a business

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Introduction

T hank you for taking the time to pick up this book about setting up an LLC.

This book covers the topic of LLCs (Limited liability companies) and will explain to you all about how they work and how to set one up!

Using an LLC as your business structure is an important part of protecting yourself and your assets from potential lawsuits. This liability protection that an LLC offers is a big attraction to business owners and people starting new businesses every day.

Having protection from lawsuits is one of the smartest things you can do for yourself and your business. In this book Im going to take you step by step through the process of starting your LLC and Ill show you in detail the documents that you will need to make your LLC legal.

We will cover the Operations Agreement which is the document used as the foundation of your business. It contains the rules and regulations of your business in addition to outlining what the responsibilities and rights of the individual members are.

You will also learn how an LLC is taxed and what it means to have pass-through profits and losses. You will see many ways in which an LLC is a flexible entity. At the completion of this book you will have a good understanding of the LLC system, why you might want to establish one, and how to go about doing so.

Once again, thanks for taking the time to read this book, I hope you find it to be helpful!

Chapter 1: Definition of an LLC

T he letters LLC are the abbreviation for Limited Liability Company. Essentially this type of legal business arrangement separates the assets and liability of the owner of the company from that of the company itself. If a person owns an LLC that has debts, then the creditors can only go after the assets of the LLC and not the actual business owners themselves.

The people who own an LLC are referred to as members. These members are ruled by an operating agreement that they create when they first form the LLC. An LLC is formed legally by filing a documents called the articles of organization with a state official, normally the Secretary of State. Every state has individual laws regarding what constitutes an LLC. However, in all states, all LLCs must be created by corporations or individuals legally capable of forming a business. There are businesses that are not allowed to be considered an LLC which include things like insurance companies and banks due to the nature of those businesses. Whenever you find yourself in the process of forming a new business, you are going to want to look into the local rules regarding LLCs just to ensure that you dot the Is and cross the Ts.

An LLC is governed by a document that is written by the founding member(s) called the Operating Agreement. This document outlines all of the rules of the LLC. It also records the members shares in the LLC and the amount of profits and losses that may be allocated to them. The Operating Agreement covers things such as voting, meetings, buying other members out, and dissolution LLC. It is one of the first documents written when the LLC if formed and it is the most important as it will allow you to set the rules of your LLC instead of having to follow the state rules.

One of the first decisions that you will have to make concerns how the new LLC will be structured. This is perhaps one of the most important decisions you will make for the company, bar none, and it should not be taken lightly as it is going to ultimately determine how much you will end up paying in taxes, the amount of paperwork you end up having to do, and the amount of personal liability you will have, which will also affect your ability to get loans for your business. How you end up forming your business will depend on the laws of the state where you have your business.

Below are some of the most common business structures. Once you understand them, you will be able to then decide for yourself how forming an LLC will compare with having either a corporation, a partnership, or a sole proprietorship. When choosing one of these business structures, you need to base your decision on the circumstances of you, the business owner. It will depend on your liability, the taxation you want, and the recordkeeping that you want to do.

Sole Proprietorship

This is the least complicated way that you can structure your business. Its very simple in that all of the control goes completely to the owner. As the name implies, a sole proprietorship is a company that is owned exclusively by a single person. However, as simple as that seems, it is good to keep in mind that this type of company does not protect the owner from any hardships or debts the business incurs. This means that if the business should be sued, the owner takes the full brunt of that as well, and their personal assets will be at risk.