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24 Jan 2011

Start an LLC

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Start an LLC

Start an LLC (Limited Liability Company)  is not hard. In fact, you can start an LLC without any legal beagles or internet one size fits all help. I’m going to assume you have already answered the question, “why start an LLC” and decided you need one.

The favorite question people have for me at events where I speak is, “How do you start an LLC?”

Start an LLC by Drafting Articles of Organization

The first thing you need to do to start a LLC is to draft your articles of organization. Pick the state you want to start a LLC company in, and go to that state’s website. It will be on the state’s website under the Secretary of State’s heading, business department, or business formation division of the state.

Once you’re there, get their blank form for setting up LLC articles of organization. In some states, you can fill out the form right on line. They will have a Q&A section on how to start a LLC business in their state. (Sometimes their Q&A creates more questions than it answers.)

Once you’ve filled out the state forms, you have to pay the “start a LLC” fee. The state will often take a credit card; many even take the credit card payment online. Can you see why you don’t need to pay the “expedited fees” on internet new start LLC setup sites?

By the way, don’t be sucked in by the advertisements that you have to form your LLC in Nevada, Delaware, Alaska or any other exotic place. When you start a LLC company, just do it in the state where you will be doing business or the LLC will own property.

There are no real advantages to Nevada. It’s just a big advertising campaign to get your business. The “corporate organizers” will just make a lot of money for doing nothing acting as your “registered agent.”

You’ve got to have someone (a warm body), in the state where you’re starting a LLC, to act as your registered agent. Picking your registered agent is another story on how to start an LLC company, but if you are living in the state or have an office in the state, you can be the registered agent.

When you’re setting up an LLC, don’t fill out any more information for the state than you have to. It’s public information. The less information you put out there, the safer you are. Some lawyers like to embellish to make you think they are smart. Just use the state forms to start LLC registration processes, and give the minimum information required.

Start an LLC with Operating Agreement

The operating agreement is really important. It provides you with your tax advantages, asset protection, disaster plan, and “operating” instructions. You get to write the operating agreement. It isn’t a one size fits all document you can grab off one of the “How to Start a LLC Company” websites.

As long as the terms of your operating agreement don’t violate the laws, you can basically write anything you want into the operating agreement. I am stunned at the number of clients who come to me and they have set up an LLC that is worthless. The first thing I want to see is their operating agreement.

Their LLC is worthless, because they got their paper (articles of organization) off some cheapo How-To-Start-a-LLC website, and they never knew about the operating agreement. Or, they didn’t get the operating agreement, because it was more money than the articles of organization.

I have actually seen cases where the client was starting a LLC with an attorney, and the attorney never got around to giving them an operating agreement. Basically, no operating agreement – no protection – no tax benefits – no company.

Getting your operating agreement isn’t a how-to-start-LLC nightmare. It’s a big opportunity! You get to tell your partners, creditors, lawyers, courts and everyone else how they have to deal with your LLC. When you understand that, your operating agreement becomes a living dynamic document. The last thing your want to do is ignore it, or even use trite boilerplate from some “How to Start Up an LLC” Lawyer-approved website.

Tax Filings

Once you’ve got your articles of organization and operating agreement, you’ve got to make some important tax decisions. If your LLC is successful, the tax decisions you make setting up a LLC can mean tens of thousands of dollar more each year in your pocket.

The tax forms have to be filled out properly and filed timely. You’ve never seen an answer-three-questions and bingo-you-got-your-LLC website launch into the tax decisions. You’re setting up a LLC; don’t you want the best asset protection and the most tax benefits you can get?

There are actually many decisions you need to make when you’re setting up an LLC that we haven’t talked about here. There all important decisions without a hard fast solid answer. You’ve got to study up to get what you want, or you’ll get nothing in almost every case.

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05 Jan 2011

LLC Creation Fast and Easy

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LLC Creation

LLC creation is this the best entity to use?  The first decision people make when they want to “start a business” is which entity to pick.  A lot of time and money can be spent figuring out this question.  The choices are sole proprietor, partnership, limited partnership, corporation (C or S), and limited liability company (LLC).

The sole proprietorship is the easiest form of business for an individual to “set up.”  There basically isn’t any set up.  You just start doing business.  You will file a schedule C with your 1040 form at the end of the year, and you may have to pay quarterly taxes, but that’s about all it takes.  There is no liability protection for you operating as a sole proprietor.

The partnership is the easiest form of business for two or more individuals to “set up.”  You just start doing business.  Keep separate accounting for the business, and any profit or loss “passes through” to the tax returns of the individual partners based upon what they get allocated from the partnership.

The disadvantage in the partnership is there is no liability protection.  In fact, there is an increased liability, because each individual partner is personally liable for whatever the other partners do.  An LLC creating liability protection that isn’t offered by the partnership gives the LLC a major advantage.

Limited partnerships have liability shielding for the limited partner(s), but not the general partner(s).  Profits and losses pass through to the individual limited and general partners.

The “distributions” of profits and losses in a limited partnership have to be made on a pro rata basis based on ownership.  Creating a LLC, can give you the advantage of being able to distribute profits and losses on need, rather than ownership considerations.

Corporations will give you the same liability shield, whether you use a C corporation or an S corporation.  The asset protection is the same.  In fact, basically the same laws are used in LLC liability shielding, thus creating LLC shielding that is just as effective as the corporate shielding.

Corporations have unique tax structures.  While the asset protection possibilities of the C and S corporations are the same, the tax structure is very different.  Chapter C of the IRS Code defines the “classic” corporate tax structure.  The rules in Subchapter S of the IRS Code define a tax structure that is more friendly to a small business owner.

The Subchapter S rules establish a “pass through” structure where the profits or losses are passed through to the 1040 form of each individual owner(s).  The laws allow LLCs to establish themselves as either a C corporation or an S corporation and create LLC tax structures identical to the corporate tax structures.

Actually, you can create LLC tax structures that fit the partnership or sole proprietorship structures.  You simply file the appropriate papers with the IRS when you create your LLC.

The LLC requires a lot of other “formalities” when you are creating a LLC structure that will actually protect you and give you the neat tax advantages possible.  You need to file your articles of organization with the state, draft your operating agreement, file the tax forms, and other things.

Your operating agreement is the document where you need to spend your time when you creating an LLC structure.  It should be unique to you. Boiler plate LLC creation documents won’t do, so study up and get it right.  The operating agreement is your “LLC bible,” but you get to write it how you want, and the courts will support what you write.

This unique character you can get creating a LLC is something everybody, particularly the LegalDoom internet sites, just never mention, because you can’t “spit out” a unique document.  It has to be created.

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 LLC creation.

Lee R. Phillips
LegaLees Corporation
556 E. 1400 S.
Orem UT 84097
801-802-9020

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29 Oct 2010

How to Open a LLC Company

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 Open a LLC CompanyOpen a LLC Company

Are you thinking to open a LLC company. You can open a LLC by yourself. Just be certain you have a complete organization. Don’t be fooled by the “quick and easy open LLC company in two easy steps” internet sites claiming that you can open up your LLC in seconds. While it is true you can open your LLC quickly by filing your Article of Organizations with the state, if you stop there you are not getting full asset protection. You’re getting the lowest common denominator. Unless you’re rolling the dice and betting you’ll never have a problem, opening your LLC should be a process you complete after your have some education.

If you are serious about liability protection and proper set up to open a LLC company. First you need to know that the Articles of Organization by themselves are not enough. You also need an Operating Agreement to define how your company is set up and run. If your LLC is involved in a lawsuit, your Operating Agreement can level the playing field in your favor.

How you structure your the Operating Agreement will allow you to protect your personal assets from company disasters. It is also important to set up your agreement and so you will get maximum charging order protection out of your LLC Operating Agreement. You also need to have more than one owner (member) of your LLC after June 2010.

Finally you need to make certain that you make the proper tax elections when you open a LLC company before your opportunity to determine how you will be taxed expires.

My LLC WizardTM provides this and other information. The LLC WizardTM is a 6 hour audio course and over 150 pages of printed supporting documents that teaches you how to customize computerized LLC documents. You can use the computerized documents over and over again. The education you get and the ability to design customized documents for your unique situation gives you all of the money making and asset protection potential an LLC Company offers.

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22 Sep 2010

How to Start a Limited Liability Company

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“How to start a limited liability company” is always the question.  Maybe it is not the first question you ask, but you will probably get there. Deciding what business structure to use is one of the first decisions you have to make when you decide to start a business.

In the economic times we’re in, starting a business may be a great idea. In the beginning you may not have to worry about how to start a limited liability company. You may not want to start a limited liability company. I’ve seen people spend all their time, energy, and money on figuring out how to start a limited liability company, and they never make any money.

The easiest thing to do to start a business is just start making money. If you’re acting alone, you’ll be considered by the law and the IRS as a sole proprietorship. If you’re acting with one or more other people, then you’ll be consider a partnership, unless you file papers with your state and the IRS to say you want to be a limited partnership, corporation, or an LLC.

You’re reading this website because you want to know how to start a limited liability company, but you need to evaluate your decision to form an LLC, rather than just be “sold” on getting your LLC. Do you need a liability shield? Do you need an LLC taxation structure? Asset protection and tax benefits are the two main reasons you would want to know how to start a limited liability company.

How to Start a Limited Liability Company – Limited Liability Shield

You need to have a limited liability shield, if your business gives you any liability exposure. If your business is day trading stocks, buying real estate notes, or some other activity that really doesn’t give you any exposure and you’re acting alone, then you should probably just act as a sole proprietor – at least until you are making good money.

LLC Partnership

If you have a “partner” you should have a corporation or an LLC, because “partners” get you in trouble. In a partnership, each one of the partners can bind all of the other partners. Stated a different way, each one of the partners is jointly and severally liable for what each one of the other partners does. Never put yourself in a position where you are liable for what somebody else is doing. Partnerships are very dangerous.

Here’s the question: how much do you trust your partners? If you trust your partners 100% then the answer is use an LLC. (There may be other reasons not to use an LLC, but as far as the “do you trust your partners?” issue is concerned, use an LLC if you trust your partners fully.) If you have some “questions of trust” about your partners, then you should use a corporation. In an LLC, “accounting games” are easier to play. A corporation (taxed as either an S corporation or a C corporation) requires profit distributions to be made pro rata. In an LLC, distributions don’t have to be made pro rata. In fact, a minority owner can be cut out of the profits in an LLC a lot easier than they can in a corporation. One question you need to truthfully answer in the “how to start a limited liability company” game is how much do you trust the other partners? (In an LLC they aren’t partners. They are “members.”)

How to Start a Limited Liability Company -LLC Operating Agreement

Yes, the limited liability company operating agreement can lay out the accounting rules to protect the minority owners, but it takes some fancy drafting, and if you are going to be the minority LLC member, you’re not in a position to draft the limited liability company operating agreement. I guarantee you the forms you are getting off the word processor at your attorney’s office or off the net are not designed to protect the minority guy. You’re a lot safer to use a corporation, if there are any trust issues when you decide how to start a limited liability company.

How to Start a Limited Liability Company from a Negative Perspective

When deciding how to start a limited liability company, you need to take a negative view. What happens if your business fails? Nobody ever asks you to think about that. After all, your business is a great idea. Right? The fact is the vast majority of businesses fail. For just a minute now don’t think about how to start a limited liability company; think about how to close down a limited liability company. Unless you have a great reason – and it had better be good – you shouldn’t use a C corporation or an LLC taxed as a C corporation as your business form.

LLC vs C Corp

In fact, there aren’t a lot of good reasons you should ever use a C corporation for your LLC taxation structure. Unless you are planning to sell stock in the public markets, you have foreign owners, or the main reason for creating a company is to get some “fancy” benefit plans, when you are told to establish a C corporation structure, you had better get a third and fourth opinion before you actually file your tax structure selection.

If your business fails, there will be losses. In an LLC taxed under C corporation LLC taxation structure, all of the losses will be “trapped” in the company. Unless you have profits in the C Corporation or the LLC taxed as a C corporation, you can never offset losses. With an S corporation, partnership, or sole proprietorship LLC taxation structure, the losses in your business can be carried forward and offset against income you personally have in the future.

LLC and Personal Finances

Another issue you need to evaluate in the “how to start a limited liability company’ game is your personal financial situation. If you are facing a shaky financial future, you probably don’t want to use a corporation. Why?

Remember, one of the how to start a limited liability company questions is “what’s the need for liability shielding?” When the internet site or lawyer talked to you about how to start a limited liability company, they were concentrating on the “corporate shield” liability protection. The LLC will give you the same “corporate shield” as a corporation. Please note: the LLC “corporate shield” is the same no matter what the LLC taxation structure is.

llc asset protection

Your LLC not only gives you the “corporate shield” that protects you and your personal assets from business liabilities, your LLC will protect your company from your personal liabilities. The LLC gives your company protection from your personal financial failures. Personal disasters such as divorce, bankruptcy, personal lawsuits, catastrophic illnesses, and other problems, can have disastrous effects on your business unless in your “how to start a limited liability company” process you have

beefed up your limited liability company operating agreement to protect the business from you.

Protection From an LLC

If your business is a corporation, it can’t be protected from your personal disasters. An LLC (no matter what the LLC taxation structure is) will give your business the best possible protection from your personal problems. The discussions you have had with your attorney and everything you have read on the net concentrate on the protections your business structure will give you and your assets. When you are deciding how to start a limited liability company, YOU must consider the effects of your personal problems on your business.

Yes, the LLC laws help protect your business from your personal problems, but the laws require you to “trigger” the protection the laws offer. How you write your limited liability company operating agreement will determine how much protection your business gets. The standard internet forms and the vast majority of lawyers (on the order of 90%) never even consider the provisions that have to be included in order to give your business maximum protection from your personal problems.

How to Start a Limited Liability Company The Complete LLC System

The LLC Wizard System spends almost an hour in module 6 going through the asset protection an LLC can establish. It is the ultimate how to start a limited liability company system. If you want to get an LLC with ten mouse clicks or answer three questions on the phone and have your attorney pump out LLC papers, the LLC Wizard System is not for you. But, if you learn how to start a limited liability company it can give you a ton of asset protection and tax advantages. Starting a limited liability company goes way beyond filing your Articles of Organization form and paying your state fees.

Remember, you and your family can use the LLC Wizard System to set up dozens of limited liability companies. The System is totally tax deductible, whereas your internet document costs and your attorney costs have to be “amortized.”

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