How to LLC
Which State? Which Agent? Which Manager? What to File?
If You Don’t Understand the Options, It Will Cost You Later
How do you build an LLC or start a business? All you need is a little coaching, and you can do it. You should take the time to do it right, and you’ll make more money and sleep better at night.
Unfortunately, you can’t blindly trust your lawyer to take care of it for you, and definitely the “services” in Nevada or some other state aren’t going to do it for you either. The internet sites only get you halfway there. Without some basic knowledge of what needs to be done, you’re basically prey for the “system.”
Are you just getting started? In addition to this mini course, you can check out my free LLC webinar training.
I’m about to save you a lot of time, frustration, and money in setting up an LLC.
Already established in a business? Now is the time to beef up your asset protection and profit potential. Or maybe you’re worried about how to cut taxes and prevent lawsuits.
If you are paying too much of your profits to the IRS, imagine if you could start putting some more money away for yourself. This is an important part of setting up your LLC that is usually overlooked.
Wherever you are on this business continuum, I’m sure you’d like to make more money, and you recognize that you need to do something to get better asset protection in today’s uncertain economic climate and lawsuit happy society.
Here’s the central point I want to make for each of you:
The LLC kits, the quickie lawyer documents, or the fill-in-the-blank internet forms are the lowest common denominator documents that offer minimal liability protection and leave you at the mercy of the IRS.
Once you get the documents for your LLC, you’re on your own. How to maximize your asset protection and squeeze more money out of your LLC is a mystery! Most people do nothing. They just settle for the “default” IRS status and bag the corporate formalities. Their company never reaches its potential and down the road, everything crashes and burns.
You don’t need to settle for second best, and you shouldn’t!
LLC Basics: How to set up an LLC
What State?
The first thing you must decide: Which state do I form my LLC in?
Form your LLC in the state where you will be making most of your money or where the LLC will be owning property.
You may have heard to incorporate or form your LLC in Nevada. Or if not Nevada, try Delaware or Wyoming. These states want you to believe they have privacy or better asset protection. It is just NOT true!
The reason you hear so much about Nevada as the place to form your LLC is because setting up LLCs in Nevada is a big business. Nevada was one of the first states to enact flexible LLC law and they profited from it. Now Nevada loves the ongoing profit it gets from the continuity of having you pay the registered agent fees every period. It generates a huge income for the companies that can talk you into using their services and registering in the state.
Today the Nevada laws and other state laws are all about the same. You can’t really name any advantage to using an out of state LLC unless you are doing business or own property in multiple states. In fact, there is usually a disadvantage because you are double charged. You have to pay in the state where the LLC is formed. Plus, you will also need to register in the state where you are doing business or own property in an LLC, and that state will also charge you its fees and make you subject to its laws and control.
Forming your LLC in Nevada, or some other state, will just cost you more money and get you no more asset protection.
You may have heard that Nevada doesn’t have a state income tax. Actually, that’s not true, but it doesn’t matter because you will pay income tax in the state where you are making money. Creating your LLC in some exotic state won’t give you any tax savings, and you’ll be filing multiple returns.
Form your LLC in the state where you will be making most of your money or where the LLC will own property – end of discussion.
If you really are doing business in every state, then Nevada, Delaware, Wyoming or one of the glamour states might be a good place to form your LLC. Otherwise, it’s simpler and less expensive to just use the state where you are a resident, making money, or where you own property. If you are only doing business in your state or that’s where you own property, you really can’t give me a practical reason to put your LLC in a glamour state.
Which Agent?
The second thing you need to decide: Who will be the state’s registered agent?
You will be the agent. If you are forming an LLC in the state where you live, you’ll be the registered agent. You have to supply a physical address. The reason for this is that the sheriff has to show up and get you to sign papers if you are sued. Receiving lawsuit papers is basically the only function of the registered agent.
If you are filing in a “foreign” state, you’ll have to hire a registered agent. By the way, a hired registered agent won’t give you privacy.
People don’t like to be their own registered agent because of the privacy issues. There are a number of ways to protect your privacy, if you don’t want to list your name and physical address. But paying a registered agent isn’t one of the ways.
Which Manager?
Next you need to pick your management options.
In the standard process of forming an LLC, a typical check the box question on the template questionnaire is: Member Managed? or Manager Managed? This is not an intuitive question. The truth is you need to know what you are doing.
I listened to a guru the other day on a webinar try to explain the difference, and she had no clue. It is important to know what the positions represent. The reality is that the positions do not control voting of shares or who is liable.
Your choice of manager controls your asset protection options. It does determine whether or not you can have “continuity of life” or a “transferability of interests” in your LLC.
Whether to use a member-managed or a manager-managed LLC is a lot more than a check the box issue. It can actually make you more money or cost you money down the road. This is an election that you make according to your company structure and needs. Most of the time you’ll pick member-managed.
What to File?
To form an LLC, all you have to do is file the state form for the Articles of Organization. If you are filing your LLC immediately, jump directly to our State by State Information pages to find the forms for your state and get going.
People have lots of questions about how to fill out the state forms where they are going to file their LLC. I go through each line of the state forms in the audio instructions in the LLC Wizard, my 7 hour audio tutorial with actual customizable LLC documents.
In starting up an LLC, you really don’t need a lawyer. The forms can be filed online in all states now. Your lawyer will simply use the state forms. If he is making the articles of organization more elaborate than the state forms, that’s a mistake.
The articles of organization are public documents. They are filed with the state for everyone to read. Never give more information on the form than the minimum required by your state.
I’m sorry if I’ve burst your bubble on the romance of setting up a Nevada LLC, a Wyoming LLC, or an LLC in some exotic place, like New Mexico or Utah. But the good news is you can easily do everything yourself and get a comprehensive LLC instead of the lowest common denominator one size fits all documents, the template sites generate or the lawyer cranks off the word processor.
If you have an LLC in a state where you aren’t actually doing business or owning property, you have wasted your money. Kill the LLC, and cut your losses. There is a tiny argument for using a private Wyoming LLC as a holding company, but the situations where I would recommend that are very rare.
I hope by now you are saying… “Ok, I’m convinced… I Can Do My Own LLC!”
Yes! You CAN do it. I am going to show you how to get an LLC that will actually give you double asset protection and huge tax benefits you may not get otherwise.
You can start immediately and have your LLC within hours – no middleman.
Sincerely,
Lee R. Phillips
P.S. Have you attended my free online LLC webinar? Click here to learn more.