A creditor can come in many forms. It could be the winner of the lawsuit against the LLC or someone to whom you owe money, including a bank that is foreclosing on one a piece of property. The object in this article is to show you how to use the LLC asset protection tools to save your form the creditor.

LLC Asset Protection Advantages

One of the advantages of using an LLC over a corporation is the fact that when a member in an LLC is in trouble personally through an illness, divorce, lawsuit or other bad financial situation, the assets in the LLC are protected to a greater degree. Traditionally, corporations have been used for “family” planning or “closely held” business structuring, but the corporation has no ability to protect the business from the personal legal trouble of a member. The ability of the LLC to protect against personal legal trouble of the members is one of the advantages of the LLC asset protection.

I am getting a lot of calls from folks who have invested in property, and due to the rotten real estate markets, they are losing one or more of their properties. They are ending up as debtors with large foreclosure judgments against them. When a creditor gets the judgment, they will try to collect from your assets. This means they will go after any property you “own.” If the properties are held in different land trusts, the foreclosure judgment creditors will simply go from land trust to land trust until they can satisfy their judgment. If the properties are held in corporations, they will simply get the stock that the debtor owns in each corporation to satisfy the judgment and then have full access to the properties. If however, the properties are held in a limited partnership or LLC, the creditors can only obtain a charging order against your membership interest in the LLC. If you have another member in the LLC, then they take control and the creditors can only obtain a charging order against the debtor’s limited partnership interest in the FLP or their membership interest in the LLC.

LLC Ease of Management

Another LLC asset protection tool is that it offers the liability protection of a corporation, with the ease of management of a partnership. Traditionally in the past, every business was formed as a corporation because of the liability protection it afforded its officers and directors. This same protection is afforded the members of an LLC. An LLC has additional flexibilities and shielding that you can’t get in any other entity.

It is not uncommon it today litigious society to have someone sue your business. If the business is being run as a sole proprietorship you will be personally liable. If you have taken the time to put the proper business entities in place and maintained them, you will be protected.

The bottom line is you can protect your assets using an LLC. The LLC asset protection will help even if you start it after you know the lawsuit is coming. You should start putting assets into an LLC to protect them and usually it will work. Even in the case of a bankruptcy, if the transfer takes place more than two years prior and the LLC documents are written properly, the assets can be protected. Get Your LLC in order today. Check out my LLC Wizard packages for help in getting started.

By Lee Phillips

The post LLC Asset Protection appeared first on How to Form an LLC or Forming an LLC.

LLC Operating Agreement Document

An LLC operating agreement is a document that you write for your company. It is true that you never file it anywhere-nobody knows about it. But that does not mean that it is not important. It controls everything that happens in your LLC-how it is taxed, how it is run, what happens to the LLC after you die, what people have to do to get the company assets if you need to declare bankruptcy, and how company assets are protected. It can save your company in the event of a lawsuit.

LLC Operating Agreement Template

An LLC operating agreement template comes in many forms. Many internet sites offer it as a costly add-on to their “free articles of organization kits.” Consequently, many small business owners just skip it, figuring they can save some money. Unfortunately this is costly mistake. Other places may offer a one size fits all LLC operating agreement template. This is rarely adequate because there are certain choices and clauses that must be included to give your LLC the best asset protection and tax choices for your business.

Write Your Own LLC Operating Agreement

Yes, you get to write your LLC operating agreement. This is a great opportunity. The three or five page forms you sometimes get off the internet aren’t going to come close to addressing the issues you need to cover in your operating agreement. Your LLC operating agreement template should be somewhere between 20 and 30 pages long and filled with choices.

Let’s consider an example. Most state statutes claim that operating an LLC doesn’t require you write an operating agreement. But, when a tenacious lawyer comes after your business, everything changes. When the lawyer gets you into court, one of his main arguments will be whether or not you’ve treated your LLC as a “company.” He will argue that your LLC is just your “alter ego.” He will then come after your personal assets.

If you use the LLC Wizard’s Complete Operating Agreement, which includes 90 minutes of audio review and written instruction to design your document, you will have an understanding of how to avoid the attorney’s argument. When you operate your LLC with this protection, not only will your company assets be protected, so will your personal assets. You will know how to follow the LLC’s formalities checklist. The LLC “formalities” were basically developed to act as a checklist for the courts. It’s like LLC lawsuit insurance.

If you don’t have the checklist, I’ll give you one. (Get your free 27 point checklist.) If you’ve treated your LLC as a formal company, then the courts will treat it as a company too and protect you personally from the company’s problems.

Checkout my complimentary Operating Agreement Template for ideas, or get my Complete Operating Agreement with 90 minute audio instructions and customizable forms and make sure you get all the asset protection and tax advantages possible.

Remember, there’s a 30 day money back guarantee if you’re not satisfied.

By Lee Phillips, U S Supreme Court Counselor

The post LLC Operating Agreement Template appeared first on How to Form an LLC or Forming an LLC.

After all, if you file the articles of organization, you have a limited liability company (LLC) as far as the state is concerned. Why bother with an LLC operating agreement?

An LLC operating agreement is a document that you get to write and you never file it anywhere, so it must not be very important. This is the logic of many people. But it controls everything that happens in your LLC.

It controls your tax choices, what asset protection your get out of your LLC, what happens to the LLC after you die, what people have to do to get the company assets when you get declare bankruptcy, and so many other aspects of your business.

Yes, you get to write your LLC operating agreement. You have a great opportunity. However, the three or four pages you get off the internet aren’t going to come close to addressing the issues you need to cover in your operating agreement.

LLC Operating Agreement Basics.

Your LLC operating agreement should be somewhere between 20 and 30 pages long. It needs to address the tax structure of the LLC. It should address the relationship of the members to each other. If you are the only member, this becomes less important, but it needs to be there to satisfy the courts that you have a real company and not just an alter ego.

The LLC operating agreement will define what the members do and what the managers do. Use it as a checklist to determine what the responsibilities of the members and managers are. For example, who has to approve debt incurred by the company? Who approves leases and contracts entered into by the LLC.

If the LLC operating agreement says that the members have to approve these things, then you need to keep a minutes record, and each time the LLC enters into a contract or authorizes a note for debt there needs to be a minute entry in the minutes of the LLC. The members then need to periodically approve the actions and minutes.

If you just ignore the requirements of the LLC operating agreement, when you get sued the argument will be, “This isn’t a real company. It’s just your alter ego.” Unless you can show the judge that it is a real company, you will lose your “corporate shield.”

The opposing counsel will always ask for the LLC operating agreement, and he will read it very carefully. If you haven’t followed the things in the LLC operating agreement, he’s basically got you, and the company won’t protect you the way you thought it would.

If you don’t have an LLC operating agreement, you lose by default. If you haven’t written the rules, you get the state’s default rules, and they are not written to protect you. The state really doesn’t have any interest in protecting you from your mistakes and creditors.

Can you see how important the LLC operating agreement is as part of your business structure? You can study a good LLC operating agreement template and learn how to use it HERE.

In my complete LLC Operating Agreement Course with customizable forms, there is almost two hours of audio instruction that covers each part of the LLC operating agreement and walks you through step by step how to establish your operating agreement and then how to use it.

The post LLC Operating Agreement is Key-So Don’t Stop Short appeared first on How to Form an LLC or Forming an LLC.

You may need more than free LLC paperwork if you truly want liability protection for your company. There are many choices in making an LLC. Knowing what to choose and why the choice is made is essential to getting good asset protection. Often the free LLC paperwork you can find in some places comes with some serious strikes against it.

Sure, free is Ok if you know what you are starting with and how to refine it to obtain your goals, but… what if you aren’t sure? For instance, do you know where to form your LLC? Traditionally businessmen have been told to form an LLC in one state or another for tax reasons or for better security. If you are just starting out in business and have been listening to all the ads and promotions, you probably don’t know where to form your LLC. Free LLC paperwork will not help you make this choice.

Let’s face it, you may not have even realized there are options in this area and the options make a serious difference in your costs or ease of operation. The options will become clearer after you do a little comparison and then you can make an informed choice about what is right for your company. It is beyond the scope of this article to deal with each choice and why. If you just want a quick and dirty LLC recommendation, I suggest you form it in the state where you conduct business. The good news is that many states offer free LLC paperwork.

Strikes Against Free LLC  Paperwork

Another strike against the free LLC paperwork is that you often don’t get the second most important part of the startup material. An LLC needs two main documents. It is easy to get free “Articles of Organization” forms from the state where you are locating. However, you need another document called the “Operating Agreement.” This defines how the LLC is to be run on a day to day basis. Of course, LLC Wizard has both of these documents including an audio explanation of the pros and cons of every decision you need to make.

The third strike against free LLC paperwork is that you may not be told how to get the double asset protection you really need. Double asset protection is a big deal for a small business. Most companies are structured to protect the managers and members from company problems and liabilities. However, they are not structured to protect the company from liabilities of the managers and members. The good news is that an LLC can give you this protection. To get this protection certain choices must be made in the operating agreement.

In a large publicly traded corporation, if a stockholder gets into trouble, is sued, and loses stock, it is not a big issue for the corporation. Let’s face it, one member’s stock will have no real effect on the day to day management and operation of the company. In a small business, say a two man operation, if one of the managers gets in trouble and loses his member ship interests, the whole company can easily be “lost.” In a situation like that, the double asset protection offered by an LLC is a big advantage. And the sad truth is that most free LLC paperwork does not offer this advantage,

With a correctly structured operating agreement, the LLC structure will protect the company from a member’s liabilities. To get the full picture on how to form and run a good LLC that will protect your company, take a look at the LLC Wizard. Yes it comes with some free LLC paperwork, but for a small extra fee it also provides customizable forms and a comprehensive audio tutorial so you’ll know how to use your paperwork correctly and get the maximum tax advantages and asset protection. That often means thousands of extra dollars every year that would have otherwise been lost.

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A limited liability company is a legislative creation that enables a small business to get the liability of a Corporation with the ease of management of a partnership. It is basically a hybrid of those two business entities. The LLC is an excellent choice for a small business. It has the advantage of double asset protection. This means that if is structured correctly, if one of the members gets into personal trouble the company can be protected from their creditors.

S Corporations are Corporations that have the liability protection of a Corporation, plus special tax advantages. Shareholders of an S Corp can choose to pass Corporate income, losses, deductions and credit through to their own tax returns. This means the S Corp can avoid double taxation on the Corporate income.

Liability Protection LLC vs. S Corp

When it comes to liability shielding, the LLC vs. S Corp characteristics are basically identical. However, the LLC does give you “charging order protection” or double asset protection that the S Corp alone can’t give you. If you are interested and want to learn more about this type of protection, I recommend my e-Book, How to Double Your Asset Protection. It has a full explanation of relevant information to help you make an informed decision.

LLC vs. S Corp- Less Formalities

Considering “ease of operation,” the LLC verses S Corp discussion leans a little in favor of the LLC. The LLC generally has fewer “formal” operational requirements. For example, the annual meeting you need to have in the Corporations isn’t as “critical” for LLCs.

However, you need to establish that either entity, the LLC vs. S Corp choice, isn’t your alter ego, so you need to treat them formally, no matter which entity you choose. But, if you’re making the LLC vs. S Corp decision, know that the LLC is more forgiving if you don’t follow the formalities as strictly.

How do I choose between LLC vs. S Corp

You may be thinking how do I choose between LLC vs. S Corp? I am here to tell you that it’s not a decision you need to make. The good news is that in an LLC, you can have your cake and eat it too.

Your LLC can qualify to be taxed as an S Corp. In other words, if none of the members are partnerships, corporations or non-resident alien shareholders and you have no more than 100 shareholders and only one class of stock, your LLC can elect to be taxed as an S Corp.

To have your LLC get the S Corp tax treatment, you simply have to file Form 2553 with the IRS, “Election by a Small Business” signed by all the shareholders. Once you file, the differences between these entities is pretty much a non-issue, as least as far as the “taxes” of the owners is concerned.

Conclusion

The LLC is a great choice for a small business. If you are vacillating between the LLC vs. S Corp decision, the LLC would be the best choice in most cases. If most of the income from your business is “earned income,” then it would be a good idea to file an S Corp taxing structure with the IRS. If most of it is passive income (rents, royalties, etc.) then you might want to have your LLC taxed as a partnership.

The post LLC vs. S Corp appeared first on How to Form an LLC or Forming an LLC.

When forming an LLC, it is good to know that multi member LLCs offer the best charging order protection. First let me explain the history of charging order protection, and then it is easier to understand the precarious position a single member LLC might end up in.

In Old England the principal business entity was a partnership. In fact, it was basically the only entity possible if a couple of people (or even a lot of people) wanted to collaborate on a business venture. They didn’t have single member and multi member LLCs. The problem was when partner number one got in trouble personally; his creditors could come against the partnership for satisfaction of his debts and liabilities.

The question always is, “how does someone get in trouble personally?” The big one today is the person gets sick. Over 50% of all bankruptcies in the US today are a result of medical issues. You can get divorced. That’s personal not business. You make bad real estate investments outside your principal business. Those are personal investments, and today they’ve probably gone south big time. This leaves you and your LLC vulnerable to creditors and this is why a multi member LLCs are better.

In Old England when partner number one got sick and lost everything, including his partnership interest, the other partners were simply out of luck, because the new creditor literally became a partner and would simply sell the partnership assets. There was nothing the other partners could do to save their business, even though they had done absolutely nothing wrong.

The courts finally decided that having all the partners suffer just because partner number one made a mistake or got sick and had big bills wasn’t fair. So they created a system where the creditors couldn’t take the partnership interest. All they could do was put an “economic lien” on partner one’s interest in the partnership.

Once the creditor got a judgment against partner number one, they then asked the court for an order “charging” partner number one’s partnership interest for the amount of the judgment. Thus, a “charging order.”

If the partnership distributed any profits (or losses) the creditor got the profit instead of having it go to partner number one. But, this protected the other partners, because the creditor couldn’t execute the judgment directly against the partnership assets and couldn’t take over as a partner.

Multi Member LLC Charging Order Attack Justification

In the cases that have attacked charging order protection in a single member LLC, the logic has always been that the intent of the charging order was to protect the “other partners.” In a single member LLC there isn’t any “other partner” or member, so the intent of the charging order protection isn’t able to be fulfilled. You have to have a multi member LLC to justify this protection.

Therefore, the couple of court cases that have gone against the charging order concept have involved single member LLCs. Hence there is now a rise in the multi member LLC. In Florida and Colorado, it is necessary to have more than one member in an LLC to be assured of getting the charging order protection that you want.

It is also necessary to have multiple member LLCs to get charging order protection in Utah, because Utah has passed legislation that prevents a single member LLC from getting any benefit from charging orders.

Multi Member LLC Ownership Percent to Get Charging Order Protection

Technically, any percentage of ownership interests divided up between two or more individuals makes a multi member LLC. So in theory a one percent interest held by a second member in an LLC is enough to make the LLC a “multiple member LLC” instead of a single member LLC.

However, I suggest that the “other member” be given a five percent or more interest in the multi member LLC if you want to be really safe. The courts haven’t ruled on what is enough ownership interest to make a multiple member LLC.

If the courts don’t know, then for sure the IRS does. The IRS considers someone who has a five percent interest or more in a company to be a significant owner of the business. If the “multiple” member LLC status is ever challenged by a court, because one of the owners “only had” a five percent interest, you could certainly point to the IRS position and state that the courts should consider the LLC as a having more than one member, because the IRS would rule that way.

Whether it is a single member LLC or a multiple member LLC, how the operating agreement is written will make a big difference in how practical the charging order protection really is. There are lots of little tricks and poison pills that can be inserted into the language of an LLC operating agreement to make it hard for a creditor to get any traction other than a charging order when they are coming after the LLC.

Your operating agreement should define these relationships. Use my Free LLC Operating Agreement as a second opinion for the operating agreement you’ve got. If you are serious about the protection your LLC gives you, spend the extra couple of dollars and get the two hour audio tutorial I have prepared to go along with the advanced version of the free operating agreement. It will help you with the multi member LLC concepts.

I am amazed at the number of people who tie their whole life up working to make their LLC work and have no clue what charging order protection is and could care less whether they even have an LLC operating agreement. That makes life easy for me as an attorney. No operating agreement – no asset protection.

You’ve got to understand the corporate shield, charging order protection and all the “corporate formalities” that a corporation and an LLC needs to follow. Yes, your multi member LLC has to follow the formalities too, or you don’t get the advertised asset protection. That makes life easy for me and the other attorneys if you screw up. Take a minute to look at your documents and make sure you’re getting the protection you expect.

The post Multi Member LLCs Offer the Best Charging Order Protection appeared first on How to Form an LLC or Forming an LLC.

The negative spin on a single member LLC and the charging order protection comes from two law cases. One in Florida, Olmstead vs. Federal Trade Commission, held that creditors of the single member in a single member LLC could go directly against the LLC and take the assets of the LLC. This means if you have a single member LLC and creditors come against you , you could lose your business. The other similar case is the Albright case in Colorado.

Courts letting creditors go directly against the company’s assets isn’t anything new for corporations. If the single shareholder of a closely held corporation gets in trouble, his creditors can always take his stock in the corporation. Once the creditor gets a controlling interest in the corporation’s stock, the creditor will simply elect new officers and directors and control the corporation – along with all of its assets.

Partnerships are protected in a different way. The law will not let the creditors of one partner take over his share of the partnership. This is known as charging order protection

It protects the non-debtor partners from the creditor by preventing them from seizing partnership assets and thereby keeping the creditor out of the partnership affairs.

The rationale behind the charging order applied initially only to general partnerships, where every partner was involved in carrying on the business of the partnership; it did not apply to corporations because of their centralized management structure. Over the yea, charging order protection was also extended to limited partners and LLC members.

Single Member LLCs Initially had Charging Order Protection

So initially the LLC was designed to have a double asset protection. It had the corporate shield aspect of a corporation and the charging order aspects of a partnership. The corporate shield protects the members of the LLC from the creditors that are coming against the LLC directly. The charging order protection protects the LLC itself from the creditors of the members.

Charging order type protection simply cannot be achieved by a corporation. The combination of the corporate shield and the charging order protection is unique to an LLC. That’s what makes the LLC a great business entity.

However, single member LLC charging order protection is under attack. Well, maybe not under attack, but a couple of state courts have taken a swipe at it.

In the two court cases mention above, the Judge has gone against the charging order concept because the LLC involved only a single member. So now in Florida and Colorado, it is necessary to have more than one member in an LLC if you want to be assured of getting the charging order protection.

Currently you also need to have a multiple members LLC in Utah to get charging order protection. This is because Utah has passed legislation that prevents a single member LLC from getting charging order protection. This may seem silly or unfair, but the point is that this is the way the law is moving. Your state may not currently have these laws, but it is the wave of the future. You would be wise to take heed.

If you are serious about the protection your LLC gives you, check out your operating agreement and make certain you are protected. If you don’t have one you should get one. A good agreement should be about thirty pages and should define how you operate your company. I have a free agreement available at my website www.llcwizard.com. It is also a good idea to get the two hour audio tutorial I have prepared to go along with the advanced version of the free operating agreement. Now is a good time to protect yourself.

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Free LLC Forms-Your Articles of Organization

The best way to get your LLC Articles of Organization is to download them on your state website.   The best news is that in most states you can down load them for free.  These are good forms and you should go for it.  If you are uncertain where to find the state website, simply click HERE.   A word of warning, do not stop here!   If you want true asset protection you will also need a well-structured operating agreement and you should pay attention to company tax structure and formalities.  And with Operating Agreements you get what you pay for, so be careful using some of the free LLC forms being offered.

LLC Operating Agreement

A good LLC Operating Agreement should be about thirty pages in length.  It takes that many pages to define your business operations and procedures.  I would be wary of free LLC forms “sites” that offer the Operating Agreement, unless you are just using them for a guide to write something better.  The truth is you need good forms and then a discussion on how to use them.   If you don’t understand the whole picture and you make a mistake, it could be very costly.  When you get sued, the judge will set aside your LLC operating agreement and you will be personally liable.

Asset Protection for You  and Your Business

You are probably forming an LLC for asset protection.  So if it is worth forming at all, and you are serious about your business, you should form it right.  The truth is that we live in a lawsuit hungry nation.  More than 90 million lawsuits are filed in the US each year.  Business owners are the subject of many of the lawsuits because they are perceived to have “the deep pockets.”   We always read about multi-million dollar awards given out for very unreasonable claims.  Your operating agreement is the only thing that will protect you.  How much time and money would you spend on a shield if your assets and your peace of mind depended on it?

The operating agreement should be unique to you.  The operating agreement is your “LLC map,” you get to write whatever directions you want… If you do it correctly the courts will uphold whatever you write.  If you don’t fill in the details, you will be sent where the court wants you to go.  Being able to design and provide unique directions and strong protection for your LLC is something most free LLC forms sites don’t offer.  Too often, they just offer a template covering the minimum needs.

Spending a little more time and effort to create a unique LLC asset protection and tax structure instead of going to a free LLC forms place will pay big dividends for your business, and give you peace of mind. The LLC Wizard will walk you through step-by-step on how to create a unique Operating Agreement if you want additional help.  It will also explain the tax options and annual maintenance issues. The LLC requires a lot of other “formalities” that you need to attend to, when you are creating and running a LLC structure.  Please take the time to make certain that you use detailed forms or adapt your forms to your specific needs so that they will actually protect you and your business and give you the best tax advantages possible.

The post Free LLC Forms appeared first on How to Form an LLC or Forming an LLC.

Free LLC documents

Free LLC Documents

Free LLC documents are always a temptation, but are they a good Idea? Let’s face it, when you are starting a business you usually don’t have a lot of money and you save where you can. If you could download free LLC documents that would be a great savings, but would it be a safe thing to do? The answer is …partly.

Actually you can get those LLC Articles of Organization free on most state websites. (We have a site where these state references are available.) These are good documents and you should go for it, however you must not stop there. If you want true asset protection, you also need a well-structured operating agreement.

We live in a lawsuit crazy nation. More than 90 million lawsuits are filed in the US each year. Multi-million dollar awards have been given out for almost laughable claims. Once you start in business you have a target painted on you. Your operating agreement is the document that will protect you. It is where you need to spend your time and money when you create an LLC structure. It should be unique to you.

Free LLC Documents Be Careful of the “Setup”

Many business owners download some free LLC documents and figure they are “setup.” Unfortunately they are “set up” and they will find out how bad this boilerplate language set them up once the lawsuit arrives. The fact is that if you don’t define each element in your operating agreement, the state will define it for you. I don’t know about you, but I don’t want to trust my business to the state.

I got a call the other day from a man who downloaded a one size fits all LLC operating agreement for his business. It wasn’t a free LLC document, but it was simply a one size fits all document. When a lawsuit hit, the judge took less than fifteen minutes to set aside his LLC operating agreement. Whoops! There went his asset protection.

Free LLC Documents May Leave You Hanging

The operating agreement is your “LLC bible.” You get to write it however you wish… If you do it correctly the courts will support what you write. If you neglect it, you will be at the court’s mercy. The unique opportunity you have to write your LLC operating agreement using free LLC documents will determine how much money you make and what asset protection you get. Most free LLC documents just give you a piece of paper for the state registration and never mention the weightier matters and tax saving opportunities. How can they? They just can’t get into that much detail.

Uniquely creating LLC asset protection and tax structures will pay big dividends to you in the long run. One size doesn’t fit all when it comes to creating an LLC operating agreement. The LLC Wizard will walk you through step-by-step how to create a unique operating agreement if you’d like more help. It will also help you with the tax entity consideration.

Be Creative with Your LLC Documents

You can actually create different LLC tax structures to fit your business needs. You can choose to be taxed as a partnership or sole proprietorship or a limited liability company. You simply file the appropriate papers with the IRS when you create your LLC. This is something most free LLC sites forget to tell you about.

The LLC requires a lot of other “formalities” that need to be attended to when you are creating an LLC structure. Please take the time to make certain that your form documents will actually protect you and give you the best tax advantages possible.

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Forming an LLC has Lots of Advantages

Forming an LLC or Limited Liability Company is a good choice for asset protection, tax advantages and easy management. Forming an LLC is quick and easy to do, but just a word of warning there are some formalities that must be attended to if the advantages of asset protection and tax benefits are to be enjoyed. If you want true asset protection, there are four main parts to forming an LLC.

Articles of Organization

First you fill out and file your Articles of Organization. The Articles of Organization are a two or three page document that provides your company information to the state. You can get this document for free on the state website where you are forming an LLC. LegaLees.com provides a link to each of these sites.

Some may wonder where is the best state to go to when forming an LLC. They may have heard that Nevada or Delaware are good places. While it is true that these states have good LLC laws, you should know that most states have gotten tired of having businesses formed out of state. Almost every state has passed laws to discourage foreign corporations. That means they have passed laws to hurt corporations or LLC that are formed in other states.

Generally it is best to form your company where it will be conducting business. Forming an LLC in the state where your business is based is often a less expensive course of action, because you can act as your own registered agent. You will not need to pay to have someone receive documents.

When filling out the Articles of Organization, it is important to remember that this is a public document. Do not give any more information than is required. Mainly you are just giving the state the information it needs to contact you and understand who is involved in your LLC.

Operating Agreement

Once you file the Articles of Organization, the second thing you need to do is make an Operating Agreement. When forming an LLC you should know that the Operating Agreement is the heart and soul of your LLC. It directs how the world will deal with your LLC. Yet often folks neglect to make this vital document.

A good operating agreement will be about 30 pages long. I am not trying to sound like your high school teacher, but it is important when forming an LLC that you include all of the provisions you need to take care of future problems. The length is just what is needed to cover the eventualities you will face once you have formed your LLC.

One of the best things about the operating agreement is that it can be structured to allow for what I call “double asset protection.” This means that not only can you have asset protection personally from company problems, but the company can get protection from your personal problems. This is a vital feature to take advantage of. After all, asset protection is a primary reason for forming an LLC.

Tax Election

The third thing you need in forming an LLC is to file for your tax election. You might not realize that the IRS lets you choose how you want to be taxed. You can be taxed as a sole proprietor, a Corporation or a partnership. The important thing is that you make the election within 90 days or you will default and be taxed the way the IRS chooses. Most people like to make their own election, once they understand the options.

Company Formalities

Fourth and finally, when forming an LLC you need to keep good company formalities in place. This is the time when you need to form good habits. For instance, you don’t comingle company money with personal money. You discipline yourself to keep good records by keeping your receipts and balancing the checking accounts. It is also important to have your company meetings and keep minutes.

Starting a new business and forming an LLC can be an empowering experience. It is important to remember to do it correctly. Don’t cut corners and miss out on the benefits that could be yours. LLC Wizard has a complete kit to let you take advantage of all the benefits.

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