Do you own your own business, or plan on starting one? If so, you need to know all about the LLC meaning. It’s the thing that’ll help protect your business (and personal) assets should any legal issues occur.
Don’t know what an LLC is or why it’s good for entrepreneurs? In this article, we’re covering the ins-and-outs of LLCs, including what they are, and why you need one as an entrepreneur.
LLC Meaning: Everything an Entrepreneur Should Know About LLCs
An LLC, or limited liability company, is a business structure. If you choose the LLC structure, you won’t be personally liable for your company’s debts or liabilities.
LLCs are essentially a mix of other business structures and share commonalities with corporations and partnerships or sole proprietorships. The limited liability feature is similar to that of a corporation, but the flow-through taxation is akin to the partnership structure.
An LLC can be owned by one person or more than one. If it’s just one person, it’s known as a single member LLC. If it has more than one person, it’s a multi-member LLC.
What are the Benefits of an LLC?
There are many reasons for an entrepreneur to choose the LLC structure. Here are some of the major benefits you should know:
Personal Asset Protection
The biggest benefit of LLCs is the personal asset protection that keeps you and your business secure. This means you’ll never be personally responsible for your LLC’s debts or lawsuits, as long as they’re not fraud or criminal behavior related. If you have a multi-member LLC, your personal assets are also protected because the LLC is legally separate from its owners.
Convenience & Simplicity
LLCs are easy to form and maintain and require little paperwork, unlike other business structures. LLCs don’t have to hold annual meetings or keep extensive records like other corporations. In some states, they don’t even need to file annual reports.
As mentioned above, LLCs have flow-through taxation, which means profits are only taxed once on the owner’s individual tax returns. In contrast, standard C corporations are taxed twice on distribution to stakeholders.
What are the Disadvantages of an LLC?
Like all business models, LLCs do have some drawbacks. Because LLCs benefit from flow-through taxation, they’re required to pay taxes on their share of LLC income, regardless of whether or not they are given a disbursement.
In some states, if a member leaves the company or dies, the LLC is forced to dissolve, and remaining members are required to handle any leftover legal and financial obligations. This does not stop these members from doing business, however, it just requires them to start a new LLC.
How to Start an LLC
Looking to get your entrepreneurial business up and running? Here are some tips on how to start your LLC.
Choose a Name
First things first, register a unique name for your business. Make sure to do a thorough search beforehand to confirm your chosen name isn’t being used by another business. If you’re worried about losing out on your name, you can reserve it before you file your articles of organization.
Choose Your Registered Agent
A registered agent is the person who will receive all official correspondence on behalf of your LLC. States usually require you to list this person’s name and address on forms related to articles of organization. If you’re not sure who to pick for your agent, your state most likely has a list of third-party companies that will assist you with this.
File Articles of Organization
Filing your articles of organization is the most important part of the LLC process. During this period, you provide the state with all the basic information about your business, including the name, location, and management type. You should decide on all of these things before beginning to file.
After this, you’ll need to get an employer identification number. The IRS requires all businesses that operate as a corporation to have an EIN assigned to them for business purposes.
Once you do that, you’ll draw up an operating agreement and establish your business checking account. That’s all it takes to start your LLC! If you have additional questions about the LLC process, you can learn more.
Final Thoughts on LLCs
If you’re a serious entrepreneur, you should absolutely start an LLC. Having one can bring your business to the next level, and protect your personal interests. Now that you know the ins-and-outs of LLC meaning, you can start an LLC, and have your business up and running in no time.
Did you find this information about LLCs helpful? Need other business tips and tricks? Check out our blog for more business insights!