Forming an LLC
Forming a Limited Liability Company is the easiest and most flexible way to start your business. LLCs provide personal asset protection which shields you from being personally liable for business debts. LLCs also allow you to spend less time doing paperwork and more time operating your business.
The most notable benefit provided to
S Corps is their “pass through” taxation status, which can help owners reduce their overall tax liability. Also, S Corporations are unique in that they have the ability to distribute stock, but only to a limited number owners.
S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates.
A Notary Public is an official of integrity appointed by state government typically by the secretary of state to serve the public as an impartial witness in performing a variety of official fraud-deterrent acts related to the signing of important documents.
What is an LLC?
LLC stands for Limited Liability Company. Forming an LLC in California is the simplest way of structuring your business to provide personal liability protection. That means your personal assets are protected if your business is sued.
When a business is structured as an LLC, it becomes its own legal entity. The LLC is responsible for its debts and lawsuits, not the owners.
The owners of an LLC are referred to as members. LLC can have one owner (single member LLC) or multiple owners (multi-member LLC).
Why Form an LLC?
An LLC is just one of several business structures. Other common examples include:
- General Partnership
- Sole Proprietorship
Personal Asset Protection
Provided there is no fraud or criminal behavior, the owners of an llc are not personally responsible for the llc’s debts or lawsuits.
Pass Through Taxation
An LLC’s profits go directly to its owners, who then report their share of the profits on their individual tax returns. Hence, an LLC’s profits are only taxed once. This is known as pass-through taxation. In a C-Corporation, profits are subject to “double taxation”: profits are taxed before being distributed to owners and taxed again when owners report their share of profits on their individual tax returns.
Limited Liability Company are relatively easy to form and maintain with little paperwork. Unlike C-Corporations and S-Corporations, LLCs are not required to assign formal officer roles, hold annual meetings, or record company minutes and resolutions.
There are few restrictions on how you can structure the ownership and management of an LLC. Your LLC can be single member or multi member; it can be managed by its members or by managers who are appointed by the members. In addition, an LLC can elect to be taxed as a corporation if that is more beneficial.
**If you plan to start a multi-member LLC, we highly recommend drafting an operating agreement to protect the members from future legal disputes.
Forming your business as an LLC brings added credibility. An LLC is recognized as a more formal business structure than a sole proprietorship or partnership. Including LLC in your business name lets customers and partners know that you are a serious business.
Access Business Loans
Once you have formed an LLC, your business can begin building a credit history. This will help your business access loans and lines of credit.
Your LLC's Name
Your LLC's Name
In order to properly name your LLC, you must be in compliance with the rules of your state that govern the names of LLCs. You can most likely find out this information by contacting the office in the state government that controls LLCs and corporations. Even though the specifics of these laws may change from state to state, in general:
- The name must be original, meaning that it cannot take the same name as another LLC that is on file at the state government office
- The name must show that the business is an LLC, typically by placing "LLC," "Limited Liability Company," "Limited Company," "Ltd. Liability Co.," or some other abbreviation at the end of the name to serve notice to the public about the type of business organization.
- The name cannot include words that are prohibited by state law (e.g. "Bank" or "Corporation" in some states).