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What is a Limited Liability Company and How Can an Attorney Help you Form One?

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Deciding which business formation to choose is no easy feat. However, the popular choice for many entrepreneurs’ corporate entity is often an LLC. Let’s look at the advantages and disadvantages to learn why as well as the benefits of utilizing an experienced business attorney to help you form an LLC.

The Advantages of a Limited Liability Company

Insulation from Personal Liability

Other business entities don't separate the owner, in their personal capacity, from the business as a whole. With an LLC structure, the law grants the owner personal liability protection because it views the owner and the LLC as separate and distinct entities. As a result, an owner’s personal assets are better protected from creditors should the LLC get sued.

Pass-Through Entity

The importance of being classed as a pass-through entity means that business owners can avoid double taxation, unlike a corporation. By adding the profits and losses to their tax return, there is no need to pay income tax.

Greater Flexibility

LLC’s can be structured in almost any legal fashion an owner chooses and doesn’t require lots of formalities that must be followed like a corporation. Aside from an annual filing with the secretary of state, and an annual meeting amongst the members, little is required in the way of formalities. An LLC can also choose to be run by its members or select a managing member(s) to handle day to day operations.


The Disadvantages

Taxed as a Partnership

The IRS treats LLCs as a partnership for tax purposes unless owners elect otherwise. As a partnership, owner members are considered self-employed and must pay employment taxes (Social Security and Medicare) on the LLC’s total net earnings. LLC owners, however, can elect to be taxed as an S Corp, and if they do, they will only be taxed on actual compensation for Social Security and Medicare, not the whole of the company’s pretax profits. It’s important to note that an S Corp election may not be appropriate for all LLCs and you should speak with your attorney or accountant about the pros and cons of such an election.

There Are Limits to Limited Liability

An LLC is not bulletproof. It may not protect you and your assets from everything. Members of LLCs must follow their own formalities and go to great lengths to ensure they are treating the LLC as a separate entity deserving of limited liability protection. If members do not, and treat the LLC as nothing more than an alter ego of themselves, a court may allow the limited liability veil to be pierced.

Paperwork

To create evidence of separation, you need to create new bank accounts and apply for a tax identification number, amongst other tasks. As a result, there's a lot of paperwork, but this is fairly standard with any business you start.


How Lawyers Help Forming An LLC

The Right Fit

A limited liability company business formation isn't a one-size-fits-all policy. There are pros and cons, and an attorney can advise if it's the right fit for you and your business or startup.

Save Time

Picking a business formation is a time-consuming process. Lawyers with extensive experience in the field can anticipate potential glitches and create backup plans to keep the process on track. That means attorneys at Charles Bean & Associates will help you save time that you can then reinvest into the company.

Expert Guidance Through the Process

While filing online is quick and easy, there's a good chance you won't understand the process. For example, can you choose a registered or statutory agent and make it official? There's peace of mind knowing an expert is handling your business formation.

How Lawyers Help Forming An LLC Spokane

Operating Agreement

An LLC should not operate without an operating agreement. An operating agreement is a contract between the LLC and its members that determines how the LLC will operate. It contains terms such as how the LLC will be managed, who the members are, how members can join, how a member can be removed when meetings and votes will be held, how profits and losses will be allocated and taxes. It is an important road map for your LLC’s success and is usually required to open accounts at a financial institution, such as a bank or credit union.

Here at Charles Bean & Associates, we will guide you through the formation process and educate you along the way so that you understand each step of creating your limited liability company. With increased knowledge, comes empowerment to help avoid problems further down the line.


Why Choose Charles Bean & Associates?

Our firm has over forty (42) years of legal experience. Brian J. Bean, our experienced business attorney, has dealt with business and legal decisions, and corporate formalities, since passing the bar in 2010. He’s an accomplished lawyer who's determined to help entrepreneurs, businesses, and startups realize their full potential.

For peace of mind, consider hiring an experienced attorney like Brian J. Bean to help start your LLC. Call (208) 664-1574 or Toll-Free: (800) 829-5291 or submit a contact form to request a free consultation.

We Will Listen

Schedule a free consultation with with us. We're here to help.

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