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Creating an LLC or limited liability company is one of the popular forms of business registration in the United States. Creating an LLC is possible to do without having to hire a lawyer although most experts advise that it is always in a company’s best interests to get good legal and financial advice before making any major business decision.

Like incorporation creating an LLC is primarily designed to separate the business and personal financial interests of the business owners. Unlike incorporation creating an LLC does not restrict a business from having any management or ownership structure that meets their particular business needs. There are neither requirements for shareholders nor any need to protect their rights or make annual reports to them on business operations or investment strategies. There is also no requirement for an annual general meeting of a limited liability company or to prepare reports and minutes from such a meeting. However it is recommended to maintain meetings and members and managers of the LLC for tax purposes.

Creating an LLC does have a few drawbacks however. They include having to pay the appropriate taxes and levies to register and there are some reporting requirements depending on the state in which the limited liability business is registered.

An LLC is not viewed by the powers that be as a separate entity from the owners of the business and therefore most revenue after expenses have been deducted is usually only taxed once. In a C-corporation this income is viewed to be of direct benefit to the interests and owners of the corporation, the shareholders, and is therefore subject to double taxation, at the corporate and personal levels if dividends are paid.

Creating an LLC does give many business owners a sense of comfort because they are not liable for any of the activities or debts or the responsibilities of the company beyond their ownership stake. If something goes terrible wrong then they will lose their investment in the LLC but they will not lose everything they own personally if they are operating under a limited liability form of business. For many small business owners this in itself is well worth the time, energy and money involved in creating an LLC or Corporation.

As a small business owner, you might choose the easy and economical method to incorporate online. There are several online services available that can help with incorporating your business in one state or several. There is some paperwork involved in each state in which you want to conduct business, as well as fees that must be paid, and it is helpful to make sure all aspects of incorporation are properly handled by making use of an incorporating online company devoted to providing this service. One type of corporation that appeals to many small business owners is the limited liability company. Here are some points you will need to consider when forming an such a corporate structure.

Several small business owners choose to form an LLC when they go about incorporating their business. The limited liability company, is the easiest to form in terms of the paperwork required to be submitted to the state, as well as ongoing business records that must be kept. Because the rules governing such a business entity do not require annual meetings, there is no record keeping involved for this business aspect, which is unlike other corporation formats that require such records.

A LLC can be owned and operated by a citizen of the United States, a resident alien or another person or corporate entity outside or inside the United States. This is not the case with an S-Corporation, which requires the owner to be a natural U.S. citizen or a legal resident; no corporation or person living outside the U.S. can own an S-Corporation here. The members of the LLC can decide on their own how to divide up the profits or losses of the business, unlike other forms of incorporation.

A limited liability corporation may be required to pay Medicare and Social Security taxes on all of the business profits that the business makes. In terms of these types of taxes, if your business deals with the areas of engineering and design, the law or health care, you will likely need to consult with an accountant or tax adviser in order to determine if this business structure will adequately meet your specific business’s needs.

Each state has slightly differing requirements concerning the formation of an LLC. If you are a licensed professional wanted to incorporate in California, for example, California law forbids limited liability companies from providing professional services as an individual. If you are not a licensed professional, you may form an LLC in California, but you will be required to pay an $800 tax for the privilege of doing business in the state, plus an extra annual LLC fee that is based on a percentage of all of your total income for the year from all sources.

When it comes to incorporating small business [http://www.nevadacorporateservices.com/Business-Services.html], many owners have enough to think about without learning every state’s differing rules of incorporation. This is why it can make sense to consider incorporating online, for speedy and trustworthy service when you want to form an LLC.

If you want to form a Limited Liability Company that will be taxed as an S Corporation, you’ll want to know some basic information before you start a business. Many people choose to form their companies as an LLC but with the S Corporation taxation election. Why?

There are two parts involved, taxes and liability advantages. There is a tax advantage in most cases because having an entity taxed as an S corporation allows the owners to save on self-employment taxes (which are 15.3% up to $106,800 of earned income in 2009) on distributions of profits. It is very important to take a reasonable salary when you have either an S corporation or an LLC taxed as an S corporation.

The IRS does not like an owner of an S corporation to take only distributions that are not subject to SE taxes. A reasonable salary is the key. Second, point is that an LLC taxed as an S corporation has an extra layer of liability protection vs. just an S corporation. That is called the “charging order” protection.

These are the two main reasons it may be to your benefit to start a business and form an LLC, yet tax it as an S Corporation. Key point: make sure you file form 2553 federally with the IRS to make the S election in a timely manor (plus some states require a state form to be filed also).

Because the owner of the LLC is self-employed, 15.3% of all earnings up to $106,800 in 2009 are subject to self-employment taxes. For instance, let’s say that you earned $60,000 last year in your LLC. You would pay $9,180 in self-employment tax. That money will go toward your Social Security and Medicaid payments. However, there is a way to earn a lucrative salary without taking a hit on all of the profits.

Let’s say that you formed an LLC taxed as an S Corporation. You earn the same amount of money but pay yourself a salary of $40,000. You’ll pay only $6,120 in self-employment tax. That’s a tax savings of $3,060. S Corporations can elect to pay the remaining $20,000 in earnings as a distribution from the company. As an LLC, you can also elect to split the profits in this manner, as long as you follow IRS guidelines. That’s where the tax savings comes into play.

If you want to form an LLC but want the tax advantages of an S Corporation, you’ll have to get permission from the IRS by filing Form 2553. Timing is crucial, however. This form is due by the 15th day of the third month of the tax year. If you formed your company in May, you’ll have until August 15 to file. Miss that deadline, and you will not be able to take advantage of S Corporation tax savings.

Keep in mind that an LLC taxed as an S corporation may not be beneficial to everyone. For example, in California a licensed professional cannot form an LLC so their best option may be a corporation. Because you have three months to file for S Corporation tax status, make it a priority to seek professional assistance before making the final decision. For many small business owners, however, the ease of management that a Limited Liability Company offers combined with the lower taxes of an S Corporation make this decision an easy one to make.