Forming an LLC can help do that — but is it the best business entity choice for you? If you have questions, read below to see if this is the right path

What is an “LLC”?

The abbreviation “LLC” stands for limited liability company. The name refers to one of the primary benefits of this business entity type, which is to “limit ones liability”- LLCs allow business owners to keep their personal assets separate from those of the company. This effectively limits their own liability when it comes to company debts and responsibilities. Below you will find additional information on this type of legal structure to ensure you can select the best entity for you. 

LLCs have quickly become one of the most popular business structures for new and small businesses, mostly because they are considered to be easier and more flexible than a corporation. A limited liability company is a business entity type that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation, creating the best of both worlds for business owners.  When you form an LLC, your business becomes its own legal entity, with separate debts and legal matters. However, LLCs are still tied to your personal taxes and will be subject to pass-through taxation. However, with pass-through taxation you will not need to deal with double taxation as you will find with C-corporations.

Understanding LLC Requirements

LLCs, unlike corporations, are not required to hold annual meetings and keep minutes, nor are they subject to the more stringent record keeping required of corporations. But there are certain LLC requirements you’ll need to keep in mind such as special attention to the operating agreement. 

LLC Operating Agreements

The governing document of the LLC is called an operating agreement, and it is within this document that the members lay out all important provisions, such as standards for LLC governance, ownership parameters, and rules around member changes (adding or removing members, or what happens in case of death or incapacity of a member). The operating agreement is an internal document and is an agreement amongst the members or owners, which means it is not recorded with the state.

LLC Annual Reports

In many states, LLCs must file an annual or biennial report with their Secretary of State. Failing to file can result in your business being dissolved. To learn more about annual reports (or to have IncFastNow file yours for you), click here, or view our LLC state guides to learn about specific requirements for your state.