Before forming a Limited Liability Company (LLC), it is very important to consider what type of LLC you would like to form. There are several types of LLC’s to choose from depending on your particular business need and purpose:
Domestic LLC or Foreign LLC--Where to File your LLC?
Once you decide to form an LLC, you need to choose a state in which to make your filing. Most people choose Delaware, Nevada or their home state. Delaware is often chosen, especially by larger companies, because it has the most developed and flexible corporate statutes in the country and is considered pro-business. Nevada has also become popular because of its lack of state corporate income tax, franchise tax and personal income tax. It also has relatively low fees.
Nevertheless, if you have a small business and are going to be conducting a substantial amount of your business in your home state, it will likely be beneficial to form your LLC in that state. If you form your LLC out-of-state, but do much of your business in your home state, you will have to make a filing to “qualify to do business” in the state if there is a substantial ongoing business or physical presence in the state. You will then be subject to the same fees, taxes and regulations as if you had formed your LLC there in the first place, and you will have paid filing fees (and, perhaps franchise taxes) to more than one state.
LLC vs. PLLC?
PLLCs are Professional Limited Liability Companies. They are limited liability companies that are formed for the purpose of providing professional services. Most states require professional service providers (that is, for professions that require a license to provide services such as doctors, lawyers, architects, engineers, etc.) form a PLLC rather than an LLC. California, however, does not allow a PLLC to be formed at all. State laws vary in this area so the law in your specific state should be carefully reviewed before proceeding. Once you know what kind of entity you need, CorpNet™ can help you take the next steps to create it.
Additional requirements to forming a Professional Limited Liability Companies (PLLC) are as follows: 1) the PLLC must have one specific business purpose spelled out within its articles of organization and the purpose must be to engage in a specific type of profession as listed above; 2) the name of the professional service LLC must end in the words “professional limited liability company” or “PLLC”; 3) only members licensed to practice the profession designated as the specific purpose of the PLLC may be the members of the PLLC; and 4) the PLLC may not merge with any other LLC unless it is another professional service LLC engaged in the same type of profession and is licensed to perform and provide the same type of services.
Member-Managed vs. Manager-Managed LLCs?
Once you have chosen the state of formation for your LLC and whether your LLC will be a regular type LLC or a Professional Limited Liability Company (a PLLC), the next thing you will need to decide upon is whether your LLC will be managed by the members of the LLC or by the managers of the LLC. An LLC offers significant flexibility in how its day-to-day operations are managed. LLCs may be managed by its members (a Member-Managed LLC) or by the managers of the LLC (a Manager-Managed LLC). In single-member LLCs, the member usually manages the operations directly. If there is more than one member, the members may divide the management responsibility among themselves or they may elect one or more managers. A manager need not be a member of the LLC to serve in that capacity. For businesses where the members are actively involved in running the business, the members generally serve as the managers of the LLC.
Single Member vs. Multiple Member LLC’s:
Single-member LLC’s are LLC’s that have only a single member whereas multiple-member LLC’s are LLC’s with at least 2 or more members. Please note that whether you are a single-member LLC or a multiple-member LLC, your LLC will still need to have an operating agreement to maintain and stay in compliance with corporate formalities. However, if you are in fact going to have more than one member within the LLC, your operating agreement should contain and spell out each of the members rights and responsibilities in the event of a conflict such as a split, or death, or irreconcilable disagreement amongst the members of the LLC.
Single-member LLC’s are easier for tax purposes due to the fact that the LLC is not required to file a tax return; all the income from the LLC is reported on the individual member’s personal tax return. However, multiple-member LLC’s must file IRS Form 1065, the partnership tax return, and provide the members of the LLC K-1 forms to file with their individual tax returns.
Please note that while a single-member LLC is more beneficial for tax purposes, it does have its downfalls in terms of asset protection; single-member LLC’s will not be allowed double asset protection whereas multiple-member LLC’s are afforded this protection. As such, if your LLC is going to have substantial assets, you may want to consider forming a multiple-member LLC with two or more members to obtain this double asset protection.
So once you have decided on where to form your Limited Liability Company (LLC), and on what type of LLC - whether it will be an LLC or a Professional Limited Liability Company (PLLC), and if it will be member-managed or manager- managed with a single-member or multiple-members, CorpNet™ can save you both time and money by assisting you in selecting, forming, and maintaining your Limited Liability Company (LLC) in any state for as little as $49 plus state filings fees!
...And if you are ever less than 100% satisfied with our services, our customer service team is standing by to make things right…or your money back!
We make everything easy so that you can focus on what you do best – getting your business off the ground quickly and efficiently!!!
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