Steps to Take To Start an LLC
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By KELLY SPORS at startupjournal.com
The exact rules for forming a limited liability company, or LLC, vary by state. An LLC is similar to a partnership but has the legal protections of personal assets that a corporation has without the burdensome formalities, paperwork and fees.
All new LLCs must file so-called articles of organization with their secretary of state’s office. This is usually just a short form that asks for the names of the LLC and its members and their contact information, along with a filing fee that ranges from $30 to $200. A few states also have other registration requirements. You can find the rules and fees involved at your secretary of state’s Web site or at http://smallbusiness.findlaw.com/business-structures/llc/. Click on “State Guide: Forms and Filing Fees for Business Formation” under the Tools & Resources section.
Though it’s often not required by law, you should draft an operating agreement for your LLC that spells out the details of the business arrangement, including members’ percentage ownership, roles, rights and responsibilities, says Anthony Mancuso, a business attorney in Berkeley, Calif., and author for Nolo Press. Having such an agreement can help protect the LLC structure if it’s challenged in court and prevents you from having to default to state operating rules.
You don’t have to hire a lawyer to set up an LLC, since state requirements are usually self explanatory. But it’s a good idea to have one read over paperwork and operating agreement to “make sure your interests are protected,” says Mr. Mancuso.
Even though most states don’t require any annual paperwork or administrative procedures, you should document major business proceedings and lay out some formal procedures — like one meeting a year — to help protect your LLC status.
Some states charge annual fees and taxes that can diminish the economic advantage of choosing to become an LLC. California, for instance, charges an annual $800 LLC tax along with a $900 to $11,760 annual fee based on a business’s total annual income exceeding $250,000.
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