Are you an individual starting a business by yourself for the first time? Then, you are likely to have a lot of questions, especially about which business structure to choose.
LLCs (limited liability companies) have recently gained a lot of popularity in the United States due to their simplicity and flexibility. Forming an LLC offers pass-through taxation, limited liability, and flexible management structure.
If you plan to start an LLC, here are some essential facts that you should know about LLCs:
1.) LLC Are Easy To Form:
Forming an LLC requires minimal documentation and offers a lot of flexibility in terms of taxation, management, and operations. And the good news is that all 50 states allow you to form an LLC.
All you need to start a limited liability company is to file the Articles of the Organization with the Secretary of the State’s office. You should also obtain an EIN/Tax ID for taxation purposes.
2.) LLC Offer Various Benefits To The Owners:
As a business owner, forming an LLC offers various benefits.
An LLC can consist of one or more members (owners), who can be individuals, corporations, other LLCs, or foreign entities. However, banks and insurance companies cannot be a part of an LLC.
As an LLC owner, you can either choose to run a member-managed LLC (where all LLC members collectively make decisions) or you can run a manager-managed LLC (where an appointed manager will make all business decisions).
3.) LLCs Make Profit Sharing Easier:
What’s the best part about forming an LLC?
You don’t need to distribute profits equally every time. You can decide a profit distribution model as per your individual business needs.
By default, LLCs follow a profit distribution model where profits are divided in the same proportion as ownership interests. For instance, if three LLC members own 30%, 30%, and 40% of the LLC, the profits will be allocated to each of these members accordingly.
But you can also specify an alternative method for profit allocation of your LLC.
Want to learn more about LLCs? Check out our detailed infographic with important LLC facts below.
This Infographics is shared here after legal permission from Gov Doc Filing