| Whether you're planning your business to service a | | | | don't treat the business' books like they were your |
| very select clientele or you're going to open your | | | | own private credit account), then the chances of the |
| doors to the public and take on all comers, you're going | | | | corporate veil being pierced are exceptionally slim. |
| to need to create the business as a separate legal | | | | Popularity of LLC's |
| entity so that you can't be held personally responsible | | | | Even though many people think of limited liability |
| for the business' debts and other liabilities. This can be | | | | companies as simply being restricted to small business |
| done in a variety of ways, but one of the more | | | | owners, there are actually a number of very popular |
| popular of these is through the creation of a limited | | | | businesses which are actually LLC's. These companies |
| liability company. A limited liability company, or LLC, is a | | | | include booksellers, private lenders, and just about any |
| corporate entity that combines many of the best | | | | other business type that you can think of... all taking |
| features of legal partnerships with the stability and | | | | advantage of the unique features offered by limited |
| separation afforded by corporations. | | | | liability companies in order to operate their business the |
| One of the main advantages to a limited liability | | | | way that they want to without having to run it as a full |
| company is that it's one of the more flexible business | | | | corporation. |
| entities that you can create... the company can be run | | | | Another place where LLC's are quickly becoming |
| in a manner similar to a partnership, yet has many of | | | | popular is the internet... a number of major websites |
| the same protections for its members as a | | | | have a limited liability company behind them, which is |
| corporation would have. The LLC has become | | | | used to shield the company's members from any |
| increasingly popular in recent years, to the point that | | | | financial liabilities which could result if their website |
| many major companies that you deal with on a regular | | | | should happen to fail. As more and more web |
| basis may be limited liability companies. Is it in your | | | | designers are learning about the advantages of using |
| business' best interest to be incorporated as an LLC? | | | | LLC's to protect their personal assets and to organize |
| Here's some information for you to consider so as to | | | | their business interests, the number of limited liability |
| help you decide. | | | | companies which are operating on the internet |
| Partnership-Like Features | | | | continues to increase. |
| Much like a standard partnership, money that is made | | | | Creating a Limited Liability Company |
| through a limited liability company can be channeled | | | | If you want to create a limited liability company as your |
| directly to its members (with "members" being the legal | | | | business, then the process is actually quite simple. |
| term for an LLC's owners.) This is important, because | | | | While there are a number of companies out there who |
| it deals with a major drawback of incorporation... | | | | will process all of your paperwork and organize your |
| something that is known as "double taxation." With a | | | | company for a fee, the basic steps required to create |
| standard corporation, any money that the corporation | | | | your own LLC can be done from the comfort of your |
| makes is taxed at a special corporate rate. When the | | | | own home and all that you'll have to pay are the filing |
| owner of a corporation wants to be paid, they have to | | | | fees in order to get the appropriate paperwork filed |
| take their income as a dividend of the money that the | | | | with the state that you live in. In some states, you're |
| corporation has made... and then they have to pay | | | | even able to file your LLC paperwork online in order to |
| standard income taxes on that money. This means | | | | speed the process up even more. |
| that taxes have been taken out of their income twice | | | | The first thing that you'll need to do is to find out what |
| by the time that they receive it; this is why it's | | | | the specific rules are in your state for creating a limited |
| advantageous to have profits flow through directly to | | | | liability company. Many aspects of LLC's are |
| members. Income tax still has to be paid on money | | | | standardized nationwide due to the fact that they are |
| that is earned through an LLC, but the separate | | | | treated as a business entity by the IRS and other |
| corporate tax rate doesn't apply to any money that | | | | federal agencies; different states may have specific |
| you've made (as it isn't held by the company itself.) | | | | requirements regarding business licenses and |
| Corporation-Like Features | | | | residency. In most if not all states, the name of the |
| The great thing about limited liability companies is that | | | | business will be required to contain the letters LLC or |
| they feature some of the better aspects of | | | | the words "limited liability company" at the end in order |
| corporations in addition to those of partnerships. One | | | | to signify that the business is, in fact, and LLC. |
| of the big features that they share in common with | | | | Once you've learned any and all requirements for |
| corporations is that they are able to assume liability for | | | | creating an LLC in your state, then you'll have to file |
| their own debts... meaning that if the company goes | | | | the appropriate paperwork with the Secretary of |
| bankrupt or gets sued, then you aren't going to have to | | | | State (or the state agency specified in your state's |
| worry about the judgment affecting your personal | | | | rules for creating a limited liability company.) This |
| finances. The company will absorb the debt, and while | | | | generally involves filling out a form and mailing it in along |
| it may have to be liquidated in order to satisfy what is | | | | with a registration fee. After the paperwork has been |
| owed none of that debt will carry over to you | | | | filed by the Secretary of State (or the state agency), |
| provided that the corporate veil is still intact. | | | | then your business will legally be viewed by the state |
| If you aren't sure what that last piece about the | | | | as a separate entity. |
| "corporate veil" means, it's simply a way of saying that | | | | All that remains from that point is to contact the IRS |
| your finances are safe so long as the court doesn't | | | | and file for an Employer Identification Number, or EIN. |
| order that you're personally liable because there wasn't | | | | This works much like a Social Security number for |
| a distinct line between your personal finances and the | | | | businesses, and is used by the IRS to track your |
| company's finances. So long as you run your business | | | | company's income for tax purposes. In order to get an |
| properly like a business should be run (meaning that | | | | EIN, contact the IRS or visit their website to learn the |
| you pay yourself with the payroll instead of taking | | | | process of applying for one and then submit the |
| money directly from the business, don't use the | | | | necessary paperwork. |
| business to cover personal expenses, and essentially | | | | |