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Monthly Archives: January 2013
I have always been a big proponent of setting up businesses with a proper structure and in form of a liability protecting entity right from the start. I even started a FaceBook Page about it called LLC or Inc.
Like corporations, LLCs come into existence after making a filing with the appropriate state body, typically the Secretary of State, and paying the necessary state filing fees. The LLC formation documents are typically called articles of organization or a certificate of organization.
In terms of taxation, the LLC’s income is not taxed at the entity level as is that of a C corporation. While the LLC does complete a tax return, the income or loss of the LLC as shown on this return is passed through the LLC and is reported on the owners’ individual tax returns. The LLC’s owners then pay taxes on the LLC’s profits at the individual tax level. LLCs can elect with the Internal Revenue Service (IRS) to be taxed like a C corporation, but this is not overly common.
Other advantages of LLCs include:
- Members are typically not held personally responsible for the debts and liabilities of the company.
- Forming an LLC can help establish credibility for a new business with potential customers, employees, vendors, and partners.
- There are generally no restrictions on the number of members allowed.
- LLCs have flexibility in structuring the management of the company.
- LLCs do not require as much annual paperwork or have as many formalities as corporations and S corporations.
Some disadvantages of LLCs include:
- LLCs are more expensive to form than sole proprietorships and general partnerships.
- LLCs face more ongoing requirements, such as state annual report filings, than sole proprietorships and general partnerships.
- Ownership is typically harder to transfer than with a corporation.
- Because the LLC is a newer business structure, there is not as much case law to rely on for determining precedent.
Regarding the ownership of an LLC, the owners are called members. Members are analogous to shareholders in a corporation or partners in a partnership, depending on how the LLC is structured. Members will more closely resemble shareholders if the LLC utilizes a manager or managers because the members will not directly participate in the management of the LLC. If the LLC does not utilize managers, then the members will more closely resemble partners because they will have a direct say in the decision-making of the company. An LLC must specify at the time of formation whether it will be managed by members or managers. A member’s ownership of an LLC is represented by “membership interest,” just like a partner’s interest in a partnership or a shareholder’s shares of stock in a corporation.
When evaluating whether the LLC is the right business structure for your particular business, it is advisable to first determine the goals of your business, and then to assess the advantages and potential disadvantages of the different business structures in relation to those goals. You may also wish to seek the advice of an attorney or accountant. If you are ready to get going, want to setup an LLC or a corporation or simply want more in depth information click here.
As the last few hours of 2012 slowly but surely tick away I cannot help but reflect upon the many things – good and bad – that happened to the world, our country, cities, communities, neighbors, friends, families, my loved ones, myself, my soulmate Tam and our 4 sweet boys as well as all the many great people around us.
It is very easy to get consumed and overwhelmed by the terrible news of lives lost in wars, unimaginable tragedies such as school shootings as well as the countless know or unknown personal suffering of so many people. Just remember that bad news always get much more airtime and attention than good, positive or uplifting news.
You see, despite an expiring Mayan calendar the world as we know it has not come to an end in 2012. With hope, the right attitude and motivation we actually stand a good chance of making 2013 better than 2012.
Just remember that when the world seems to say: “Let’s give up”, Hope whispers: “Just try it one more time!!!”
Let’s all try to listen to that whisper in this coming year and make a difference not only in our personal but also in someone else’s life.
Here’s to us all and that whisper in our ear.
Happy 2013 to my family and all of my awesome friends!!!