LLC: The Flexible Business Structure Some entrepreneurs start operating their business as a sole proprietorship. This is probably because some of them just started selling a product or service or want to avoid the process or cost of incorporating. In other cases, business owners feel that their business is not risky enough to have protection or security.
While sole proprietorship is the simplest business structure to start a business, it may not offer management and tax benefits compared to a limited liability company (LLC). An LLC is a type of entity that combines the personal liability protection of a corporation and the tax flexibility of a partnership. It offers many advantages including passthrough taxation, enhanced credibility, and less paperwork than a corporation.
Why Companies are Changing Names Although an LLC shares some characteristics with C- and S-Corporations, it is different. This entity tends to be flexible while protecting the owner from personal liability. Its tax flexibility is one of main reasons many companies are considering this type of entity. The
structure
themselves
from
allows
owners
personal
to
liabilities
protect if
the
business goes bankrupt or runs into legal trouble. Some entrepreneurs are turning to this structure, as it provides benefits in terms of management and tax payments.
Specific Guidelines and Requirements Each state has specific guidelines when forming an LLC and all adhere to the same general principles. No matter where the LLC is formed, business owners
need
to
complete
specific
documents to legally form the new business entity. The articles of organization make up a simple document that starts the process of turning an entity into an LLC. This form includes basic business details such as the name, address, names of members (if it’s a partnership). The owners of the LLC may prepare and sign the document or appoint one person to do it. Another important document in forming an LLC is an operating agreement. This structures the entity’s financial decisions and provides rules for smooth operation. It functions as a document that defines how business decisions are made, including the member’s duties and responsibilities.
Accomplishing Documents To accomplish necessary documents, entrepreneurs can turn to a small business attorney. A lawyer, however, is not required to approve any of these documents. Business owners can also hire online service providers to take care of the process of filing the documents. With a little research and careful planning, owners can draft the documents themselves. Then, they can consult an attorney or online service provider to review the documents they have accomplished. In deciding to form an LLC, entrepreneurs need to determine first if it’s the right structure for them. They need to know all the things involved in operating an LLC. Business owners can contact a legal professional to know if it’s the right structure for their business.
Resources:
http://www.mycorporation.com/state/oregon.jsp http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Limited-Liability-Company(LLC) http://www.nolo.com/legal-encyclopedia/llc-basics-30163.html