You want to know what does llc mean Why did you open a new company and need to decide the type of structure that suits you? Well, it is a business structure with advantages, but you must know specifically how it will benefit you and what its disadvantages are.
What does LLC mean as a company structure?
what does llc mean? It is the limited liability company that you can choose as the legal structure of your company with the characteristic of limited liability, effective tax issues and operational flexibility.
The owners of the company that was formed as an LLC will be members, whether it is one or more people.
By forming an LLC you will not pay taxes as a separate entity as a corporation does. All profits and losses are transferred to the company to the members and they are the ones who have the obligation to report them on their personal federal tax return, in the same way that the owners of a company do.
How to form an LLC
Each state has its own regulations for forming an LLC, but generally they all require the basics:
1.The company name llc
The name chosen for an LLC must be different from another company with this same legal structure.
At the end of the name it must indicate Limited Liability Company or LLC.
The name cannot include words such as insurance and bank.
When you register the company, the name is registered automatically.
2. The articles of incorporation of an LLC
You must present the articles of incorporation as legitimation of the llc and with the information corresponding to the name of the company, the address of the company and the names of the members.
Generally, the articles of incorporation must be filed with the State Corporation Commission office, the Department of Consumer and Regulatory Affairs, the Department of Commerce and Consumer Affairs, or the division of corporations in conjunction with the corresponding fee.
The corporate agreement of an llc
While most states do not require a corporate agreement, it is recommended when dealing with a LLC with many members, for a better organization of the company, its regulations, rules and finances. The agreement includes the provisions that have been agreed, the allocation of profits and losses and the percentage of interest.
LLC licenses and permits
Once the company is registered as an llcc, it is necessary that you begin to manage the licenses and permits whose regulations depend on the locality, the state and the industry.
Press release of an llc
Depending on each state, you may need to make a press release publishing your LLC’s constitution in a local newspaper.
Taxes of an llc
Your company will not be subject to tax because for the federal government, your llc is not a separate tax entity, but federal income taxes are passed on to members and are paid with personal income taxes.
Anyway, you should check with your state tax agency because some may apply federal income tax for your company to an LLC.
What does llc mean
So verbatim what does llc mean? An LLC is a Limited Liability Company, a legal structure from which you can operate your company and from which it will provide coverage of civil liability against the actions of your company.
What is the difference between Inc and LLC?
Llc is a legal structure that gives legality to a non-profit organization, a company that protects personal assets from a lawsuit or the claim of creditors and the general partners or sole proprietors are responsible for the liability of the company before legal judgments, and accounts payable.
Inc is a corporation that as a legal structure obliges officers, directors and shareholders to be responsible for the obligations and debts of the company with a limit according to the investment they have made in the corporation.
What is an LLC corporation?
The LLC as a corporation protects the personal liability of the owners. However, at the income tax level, it is considered as a single property when it is a single owner and does not pay taxes, but credits, deductions and income sharing are transferred to its members in addition to being informed in the tax return corresponding to the owner.
The S corporation also protects against personal liability like the LLC and is a legal structure applicable when the company has several or only one owner.
When it comes to LLC, there is no limit on owners, but S corporations have limits on the number and type of owners. The quantity limit is 100 owners. The owners cannot be non-resident aliens, they can only be residents and citizens of the United States.
LLC owners are self-employed and pay self-employment tax, covering employer and employee participation for Medicare and Social Security taxes.
The owners of the S corporations They work for your company as employees, FICA is imposed, on the wages of the owners. Owners pay FICA and they receive compensation for the work they do.
In any case, each state has its own regulations regarding S corporations and LLCs, which affect the cost of forming an entity, since there is no difference between these two entities when applying for a loan.
However, lenders prefer an S corporation because it is the type of entity that existed before LLCs, it is also ideal when considering hiring new owners or going public, and it is even much easier to terminate an S corporation if they want to turn it into a public company.
For these various reasons, it is important to review all the points of advantages and disadvantages of one or another option, since although it is possible to change the legal structure when necessary, doing so implies a tax cost, whether tax or legal.