1.Why Should I form an LLC for my business?
An LLC is a legal entity that provides limited liability protection for its owners. Starting a business is a great endeavor but any business will create the opportunity for legal risks. After all, your business will be dealing with customers, vendors, contractors and may have employees and own assets such as cars or real estate. Each business interaction creates a risk of liability. A properly formed LLC provides a layer of protection between the LLC and its business activities and the owners. Owners are not liable for the debts and liabilities of the LLC merely because they are owners (unless they otherwise agree to be liable). Limited Liability Protection is the biggest reason to form an LLC for your business. Please note there are important exceptions to limited liability protection and essential obligations you should comply with in order to preserve the protection for you. We offer an eBook which is popular among LLC owners titled "The Six Step LLC Formula for Limited Liability Protection" which provides you with this important information. Other benefits to using an LLC for your business include more tax choices, operational and management flexibility, a more professional image and a lower risk of tax audit. |
2.How is an LLC Formed?An LLC is formed when it is recognized as its own separate person under state law. Each state has its own set of LLC laws and its own requirements for forming an LLC. Basically, an LLC is formed when certain statutory papers containing required information is filed and processed with a State and the State issues an official formation document. The processing time varies with each state but in most states, once the processing is completed the LLC has a formation date of the initial date the filing was submitted. This is not always the case so check with your specific state. In Virginia, for example, the LLC has a formation date of when the processing is completed. In any event, it is advised you not conduct any business activity until the LLC has been completely formed as this best protects your liability risk. |
3.Is it expensive to form and operate an LLC?Each state charges a filing fee to form an LLC and this fee can be as little as $25 in some states and as much as $1,000 in others. After formation, some but not all states charge an annual registration fee. These fees are usually between $50-200 depending on the state but some states have higher fees (for example, California where the fee is currently over $800). Overall, given the great benefits of the LLC, the costs are quite minimal for obtaining limited liability protection. It is important that your LLC is properly filed and meets the state requirements. If you want to be sure of this compliance, make sure you use an experienced and reputable source such as an attorney or a document and filing services such as The LLC Expert.com. If you would like to see state specific fees, please visit our Fee Schedule Page Form an LLC- Fee Schedule |
4.How many members are required to form an llc?An LLC can have only one member or as many members as it wants. While it was not always the case in every state, there are now no restrictions on the # of members required to form an LLC as long as there is at least one member. |
5.What are the LLC Name requirements when forming an LLC?Each state has specific rules and regulations when it comes to LLC names. The most significant limitation imposed in most every state is that your chosen name for your LLC cannot be the same as or deceptively similar to another legal entity name registered with your state. Name availability issues can get tricky because states impose varying rules when it comes to whether a name is too similar to another name. States also impose varying additional restrictions on name choices. Examples include prohibiting certain words, names improperly implying affiliations, and limitation when it comes to regulated professions (such as engineering, medicine). Take advantage of our Free Name Search Availability service which is available for most states. We offer the free name search when you request our Free LLC Guide.: Form an LLC (and look for Free LLC Guide Box). |
6.Is Name Availability for LLC purposes the same as using the name as a trademark?No. When a name is available in a state to be used as an LLC name, this just means that the legal entity can have this name and register it as an LLC name with the State. This does not necessarily mean that the name is available as a trademark to promote your goods and services. Trademark law and rights are governed under an entirely different set of laws and regulations. If your business intends on developing a valuable trademark to promote your goods or services, it is recommended you seek the advice of a trademark attorney to advice you. You can also visit the government Trademark website for more information on trademarks. |
7.Do I need a lawyer to form an LLC?You are not required to use a lawyer to form your LLC. You can learn the rules and requirements yourself and submit your own filing or you can purchase a low cost document and filing service such as our Formation Services. Please note that self submitted filings are 3-5 times more likely to be rejected than filings made by experienced services. Also, insist on using a reputable and experienced document filing service as proper formation is so important to liability protection. While a lawyer is not required to form an LLC, if you find that you need expert legal advice in making this decision and determining the structure of your LLC, it is recommended you seek a competent attorney. Many of our customers save money by using our services to form the LLC but then hire an attorney to advise them on how to structure the ownership and management of their LLC and for other business matters. Many of our customers are lawyers who use our service to form an LLC for their clients. Lawyers are quite expensive but there are now legal membership plans where you can get consultation access and limited document review services from a qualified business lower for a low monthly price. These are quite popular among new business owners. Business Membership Plan Information |
8.Can I operate an LLC business out of my home?The LLC laws do not have any restrictions on where you operate your business. Most states require that you provide a business address for your LLC but this address can be your home address if you plan on operating your LLC business out of your home or if you do not have an office address yet. Please note that you should check with your local county or city to make sure that you comply with any local law or zoning requirements when operating a home business. |
9.Are there any limitations on what type of business an LLC can conduct?Generally, an LLC is allowed to conduct any lawful business that is allowed to be operated in a state. However, some state's LLC laws do prevent an LLC from conducting certain businesses such as insurance or banking businesses. You should check with your state's laws for specific prohibitions. Also, if you intend on operating a business that requires a license by the state (lawyers, doctors, architects, etc.), you may want to check their regulations for any restrictions on the use of an LLC to provide the regulated licensed services. |
10.Can an LLC run multiple business or just have one business activity?An LLC is not limited to just operating one business activity. The members can decide to operate multiple businesses under an LLC if they chose. However, if an LLC runs multiple businesses, the assets of all of the businesses are subject to the liabilities of all of the businesses. Accordingly, many times, business owners will create a separate business LLC for each business so that the assets of each business can be protected from the liability of the other businesses. |
11.Do I need to know how my LLC will be taxed before I form an LLC?No. An LLC once formed has a default tax structure (pass through taxation). If you want to change the tax structure, you can make an election with the IRS within 75 days after formation and your chosen tax structure will apply from the formation date. |
12.What is a "Publication Requirement" for a new LLC?In a few states (for example, New York and Arizona), the state imposes a publication requirement after an LLC is formed. This requirements usually entails publishing a notice or a copy of your formation documents in one or several publications in the area where you do business. Each state has specific rules. If you purchase formation services through The LLC Expert, your formation package will include an instruction sheet for you to follow in order to meet the post-formation publication requirements for your LLC. |
13.Is there a limited duration or limited life for an LLC?An LLC can have a perpetual existence in all states and what this means is that it can go on forever as long as it remains in compliance with the state rules and has not chosen to terminate or dissolve. The members of an LLC can choose to limit the life or duration of an LLC by stating the end date in the filing documents, but it is not recommended to do this unless there is a real business reason for it. Perpetual LLCs can be terminated by the members approving a dissolution of an LLC when the LLC is no longer needed. |
14.Who can be a member of an LLC? Does it have to be a person?Another great benefit of an LLC is that it does not impose any restrictions on who can be a member (unlike an S corporation). Any adult, natural person, legal entity (corporations, partnerships, even another LLC), trust, or association can be a member of an LLC. The members do not have to reside in the state of formation and do not even have to be US citizens or residents. |
15.I've already submitted to my state an LLC name reservation form. If I use your services to form my LLC, won't the name then come up as unavailable? How to we work through that?We can prepare and submit an LLC formation for you even if you have a name reserved. You will just need to sign a document we have which lets the state know we are submitting on your behalf and email or fax us a copy of such document along with the name reservation confirmation you received from the State. |
16.I'm looking for information on whether I must form my LLC in my state of residence or if I can choose another state.No person is required to form an LLC in the state where he or she resides. You can form an LLC for your business in any state. However, for most small businesses, it makes more sense to form the LLC in the state where the business is going to be operated because it is the simplest option and easier to maintain. If you form your LLC in another state but do business in your state of residence, you will need to register your LLC in your state in any event. This results in doubling the administrative costs for your LLC because you have to maintain two registrations, registered agents and pay any required filing fees in both states. |
17.Should I form my LLC in my home state or in Nevada or DelawareYou may have heard a lot of advertisements claiming that it is better to form your business in Nevada or Delaware. Nevada and Delaware do have solid LLC laws and processes and they provide LLC owners with the utmost privacy. However, many other states (though not all of the states) offer the same level of privacy. HOWEVER, and this is a big one. If you are not living in Delaware or Nevada and will be conducting the LLC business in a different state such as your home state, your home state legally requires you to register the Nevada LLC or Delaware LLC and this registration will involve an additional filing and making the same disclosures you are required to make if you had formed the LLC in the home state to begin with. Accordingly, the privacy benefits of the Nevada and Delaware may not benefit an LLC doing business in a different state that requires more disclosures. In addition, if you choose to form your LLC elsewhere, you will be required to maintain two registrations, and two registered agents thus increasing your compliance requirements and paperwork each year. For a small business, the additional costs and maintenance can be significant. |
