FAQs
Are you considering forming a limited liability company? If so, review the frequently asked questions below to learn more about a limited liability company.
Q. What is a limited liability company (LLC)?
A. The LLC is a business entity that offers limited liability protection and pass-through taxation. As with corporations, the LLC legally exists as a separate entity from its owners. Therefore, the owners cannot typically be held personally responsible for the debts and liabilities of the LLC.
The LLC allows for pass-through taxation, as its income is not taxed at the entity level; however, a tax return for the LLC must be completed. Any income or loss of the LLC as shown on this return is passed through to the owner(s). The owners, also called members, must then report the income or loss on their personal tax returns and pay any necessary tax.
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Q. What paperwork is required to form a limited liability company (LLC)?
A. Articles of organization, sometimes also called a certificate of organization, must be prepared and filed with the state, and filing fees along with any applicable initial franchise taxes or other initial fees must be paid.
If your LLC is formed through BizFilings, all you need to do is complete our simple order form. We will prepare and file your articles of organization and pay the initial filing fees.
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Q. Who can form an LLC?
A. Typically, there are no residency or legal restrictions as to who can form an LLC. However, few states impose requirements that directors and/or officers must be at least 18 years of age, or the age of consent. For more information regarding the requirements of each state, view the state specific facts.
Why form a Delaware LLC? Learn more today.
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Q. Do I need an attorney to form a limited liability company (LLC)?
A. No, an attorney is not a legal requirement. You can prepare and file the articles of organization yourself; however, you should understand the requirements of your intended state of formation.
You can use BizFilings' service to form your LLC and save money on attorney's fees. However, if you are unsure of what entity type would be most beneficial to your business, consult an attorney or accountant.
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Q. What should I name my limited liability company (LLC)?
A. Choose the name of your LLC carefully. It is very important that your name portray the image you want for your new company. Legally, the name you select must not be "deceptively similar" to any existing company or must be "distinguishable on the record" of your state.
For example, if an LLC named Flower LLC exists in your state, you probably would not be allowed to name your business Flour Limited Liability Company. It is possible that the name you select will not be available; therefore, BizFilings asks for a second choice on the LLC order form.
Additionally, most states require that the name you select shows your business is an LLC, by including the words "Limited Liability Company" or the abbreviation of "LLC."
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Q. How many people are needed to form an LLC?
A.
The IRS does allow one member LLCs to qualify for pass-through tax treatment; however, taxation of the one person LLCs at the state level may be different.
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Q. How is a limited liability company (LLC) taxed?
A. A state-registered LLC can be taxed for federal income tax purposes as a partnership. If an LLC is not taxed as a partnership, it will be taxed at the entity level similar to a standard or C corporation.
The state income tax treatment of LLC profits and losses may or may not mirror the IRS tax treatment depending on the state. For specific information on your state's rules, visit your state's website.
Please note that California LLCs are subject to an annual minimum franchise tax of $800 per year. The first payment must be made within 3 months of forming your LLC. The state of California does send a bill to help you to remember to make this payment.
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Q. What is the organizational structure of a limited liability company (LLC)?
A. An LLC is owned by its members. They are analogous to partners in a partnership or shareholders in a corporation, depending on how the LLC is managed. A member will more closely resemble shareholders if the LLC utilizes a manager or managers, because then the members will not participate in management. If the LLC does not utilize managers, then the members will closely resemble partners because they will have a direct say in the decision making of the company.
A member's ownership of an LLC is represented by membership interest, just as partners have interest in a partnership and shareholders have stock in a corporation.
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Q. How is a limited liability company (LLC) managed?
A. An LLC may be managed by its members (owners) or by selected managers.
If the LLC is to be managed by its members, it operates much like a partnership. Each member has an equal say in the decision making process of the company.
If the members choose, they may elect a manager or managers to act in a capacity similar to a corporation's board of directors. These managers are in charge of the affairs of the LLC.
Member management is the normal default rule of state law. This means that if managers are not selected in the articles of organization, the members will direct the affairs of the LLC.
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Q. Should I choose a limited liability company (LLC) or an S corporation?
A. While the S corporation and LLC both have pass-through taxation, the S corporation lacks the flexibility of an LLC in allocating income to the owners.
An LLC may offer several classes of membership interest while an S corporation may only have one class of stock.
Any number of individuals or entities may own interests in an LLC. However, ownership interest in an S corporation is limited to no more than 100 shareholders. Also, S corporations cannot be owned by C corporations, other S corporations, many trusts, LLCs, partnerships or nonresident aliens. Finally, LLCs are allowed to have subsidiaries without restriction.
Visit our article on LLCs versus S corporations for more information. For advice regarding which entity is best for your particular situation, contact an attorney or an accountant.
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Q. What is a publication requirement?
A. A few states require notice to be published in a newspaper that a limited liability company (LLC) has been formed. States with this requirement for LLCs include: Arizona, Nebraska and New York, and BizFilings can help fulfill this requirement. The Published Notice of Formation service can be added to an LLC formation order in each of these states. For New York limited liability entities (LLC, LP, LLP), the NY Published Notice of Formation service can also be purchased independently.
In New York, limited liability entities are required to publish notice of their formation or registration in two New York newspapers and to file proof of publication with the Department of State within 120 days. The publication is made at the county level in two newspapers. Failure to comply with the publication requirement by the deadline results in the suspension of a company's authority to do business in the State of New York.
BizFilings offers an end-to-end NY Publication Service to help companies comply with NY publication requirements. As part of this service, BizFilings obtains a copy of the domestic formation or foreign registration document which allows for publication; drafts your Notice of Publication; publishes the Notice for the Statutory Period; and Files the Affidavit(s) of Publication on your behalf.
If you have already formed an LLC, LP, or LLP in New York but haven't met publication requirements yet, click here to use BizFilings NY Publication Service.
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Q. How do I get started setting up a limited liability company (LLC)?
A. After you decide to form an LLC, articles of organization must be filed with that state and initial fees must be paid. If you choose BizFilings to form your LLC, we will complete these administrative tasks quickly and effectively.
After your articles of organization are filed, your LLC should have an organizational meeting where an operating agreement is adopted, interest certificates are distributed to members and other preliminary matters are completed.
BizFilings' LLC Kit includes all the information and paperwork to make this process easier.
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Q. What is Rush Filing service?
A. BizFilings' Rush Filing service allows clients in certain states to decrease their filing time frame to 24 to 48 hours.
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Q. Is Rush Filing available for every state?
A. No. BizFilings’ Rush Filing service is available in the jurisdictions listed in the chart below. The turnaround time listed adjacent to each state is the time it will take us to receive verification that your documents have been filed with the state, following the name approval or consent and is excluding weekends and holidays.
|
Turnaround Time |
|
Turnaround Time |
Alaska |
48hr |
Massachusetts |
24hr |
Arkansas |
24hr |
Michigan |
48hr |
Colorado |
24hr |
Montana |
24hr |
Connecticut |
48hr |
Nevada |
48hr |
Delaware |
24hr |
New Jersey |
24hr |
Florida |
24hr |
New York |
24hr |
Hawaii |
48hr |
North Carolina |
48hr |
Kansas |
48hr |
Texas |
24hr |
Maryland |
48hr |
Virginia |
48hr |
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Q. How soon will I receive my documents?
A. It is important to note that the 24 or 48 hour filing time is for the formation only. It typically takes longer for the states to produce the filed documents. Once BizFilings receives your documents from the state, we will ship them to you via FedEx Overnight delivery. This means you should have your documents in hand anywhere from just a few days to one week after filing.
Please note: some states require a client's signature on the formation documents when someone other than BizFilings is acting as registered agent. In these cases, the filing timeframe of 24 to 48 hours begins after we have received the signed documents and received any applicable prior approvals or consent.
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Q. Why should I include Rush Filing with my formation service?
A. Using BizFilings' Rush Filing service secures your name and filed date in as little as 24 hours. This service is particularly valuable when you need proof of formation to secure a contract or open a bank account.
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