Forming an LLC-The Confusion with Corporations
Forming an LLC company is easy. File the forms with the state, and you’ve got your LLC. However, that’s less than half the battle when forming an LLC. You’ve got to get a good operating agreement. Then you must issue membership certificates and keep the membership log. It is also important to make your tax choices, file all of the tax forms, and the list goes on and on.
Lots of people say they are doing an “LLC incorporation” or they “incorporate LLC” forms. These terms are not appropriate to use in conjunction with an LLC business. The limited liability company LLC is exactly that. It is a “limited liability company” not a limited liability corporation or an LLC corporation.
The confusion comes because a limited liability company LLC will give you the asset protection of a corporation. The “corporate shield” is basically the same in the LLC and the corporation.
There is also confusion when forming an LLC, because of the LLC business taxing structure. You can choose to have your LLC taxed as either a C corporation or an S corporation (along with a number of other options).
Confusion in Terms
Whatever the source of confusion, just know you don’t incorporate an LLC your form an LLC.
LLCs forms are simply filed in order to form an LLC. There isn’t any corresponding term to “incorporate” for LLCs.
Forming an LLC or Incorporating
The following is a table of corresponding terms in the LLC information and corporate world.
- Corporation Limited Liability Company
- Shareholder Member
- Officer Manager
- Stock Membership Interest
- Dividend Distribution
- Articles of Incorporation Articles of Organization
- By Laws Operating Agreement
If there is only one owner (member) of an LLC, the LLC is said to be a “single member LLC.” If there are multiple members then the LLC is a multimember LLC.
Single Member LLC vs Multimember LLC
The single member LLC is under attack in some states. The state courts are setting aside the charging order protection of a single member LLC and letting creditors come directly after the assets of the LLC. Therefore, when forming an LLC, it may be advisable to use a multimember LLC, especially in Florida, Colorado, Maryland, and Tennessee.
So, to recap: don’t call your LLC business an LLC corporation, because there isn’t such a thing. You don’t do an LLC incorporation; you just file LLC forms. If you are going to create an LLC, you should probably use a multimember LLC instead of a single member LLC.
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