There are a variety of business organizations to consider for your business, including sole proprietorships, partnerships, limited liability companies (LLC), and corporations. With all of these options, it can be difficult for people to determine if an LLC is the right choice for their situation.
What is an LLC?
According to the Small Business Administration, an LLC is a type of hybrid business structure. It combines certain partnership options with some of the features offered through incorporating a company. This provides the business owners, or members of the LLC, with a level of operational flexibility.
Sometimes, when there are multiple owners of a business, they may not split the profits equally between them. With some business structures, however, their options and rights may be limited. By forming an LLC, they are able to distribute their profits as they deem appropriate. Business owners may divide their company’s profits and debts based on such factors as the sweat equity and capital contributions of each member.
For tax purposes, one-member LLCs are treated like sole proprietorships. Consequently, the member must pay self-employment taxes, including Medicare and Social Security, himself or herself. Furthermore, the member must report the LLC’s profits or losses on the appropriate form and include it with his or her personal tax return.
When LLCs have more than one member, they are considered partnerships for tax purposes, according to the Internal Revenue Service. Therefore, the LLC’s deductible losses and taxable profits are passed on to the members. Thus, the LLC itself does not pay any taxes.
LLC’s are Simple to Start
Sometimes, the easy way is the best way. With the Louisiana Secretary of State’s modern website and user-friendly GeauxBiz platform, LLC members can update and manage their company’s affairs from home.
However, we still recommend retaining an attorney to help guide you through drafting custom Articles of Organization and Operating Agreements so that your business is tailored to its members.
LLCs can provide members with liability coverage against claims relating to their business’ actions or decisions. Therefore, they cannot be held financially responsible if their business is sued or incurs debt. This does not provide full legal protection, however. Members may still be held liable for their workers’ actions in some circumstances.
LLC’s can designate a non-member to become the LLC’s Registered Agent. While the agent has a few duties, the most important is that he or she receives important notices, mail, and even lawsuits on behalf of the LLC. We recommend retaining an attorney to act as your company’s registered agent so that you can save time and skip a step if you find yourself in need of legal assistance.
Should you have any questions or you would like to discuss this issue in further detail, please do not hesitate to contact us to schedule a free consultation.