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LLC FAQ
- What is a Limited Liability Company (LLC)?
- What are the advantages of forming an LLC?
- Are there any disadvantages?
- How do I decide if I should form an LLC or S corporation?
- Where should I form my LLC?
- Where can I view state rules for a Delaware LLC?
- Where can I view state rules for a Nevada LLC?
- Who controls or manages an LLC?
- How many entities or people are required to form an LLC?
- What titles are allowed in an LLC?
- Are there any restrictions on how I name my LLC?
- What is a Registered Agent or Agent for Service of Process and why is it required?
- Do I need an attorney to form my LLC?
- What is a publication requirement and are there publication requirements for an LLC?
- Where can I view an entity comparison table?
- Where can I view a glossary of corporate terms?
- What about a corporation? Where can I view FAQ's about a corporation?
What is a Limited Liability
Company (LLC)?
A limited liability company is a type of business entity that is independent of its owner. It can consist of one or more members which may be individuals, partnerships, limited partnerships, trusts, estates, associations, corporations, other limited liability companies or other business entities. The members of a limited liability company are afforded limited liability similar to shareholders of a corporation and are allowed pass-through taxation that is comparable to a partnership. Any Questions? 888-595-2747
What are the advantages of forming an LLC?
A Limited Liability Company combines the advantages of a corporation and a partnership. The members of the LLC are allowed limited liability protection of a corporation with the pass-through taxation of a partnership. All personal assets of the members are protected from creditors for debt and from judgments against the LLC. Provided a member did not use their personal assets to secure loans or personally guarantee the debt. Unlike a Sub-Chapter S Corporation whose shareholders are limited to 75, there is no limit to how many members an LLC can have. For the flexibility and taxation benefits, LLC’s have become very desirable to business owners.
There is generally more paperwork and filing requirements to create an LLC than a general partnership. In many states, general partnerships do not have to be filed with the state filing agency. More often, general partnership documents are filed at the Recorder’s Office in the County of residence or place of business.
Unlike a corporation whose existence is perpetual, many states require an LLC to designate a dissolution date in the formation document.
In some states, when a member dies, resigns, is expelled or files for bankruptcy, the LLC is dissolved or less otherwise stated in their Articles of Organization or Operating agreement. It is often possible for the majority of members to have a vote to continue the LLC as long as the vote takes place within a short time frame; generally 90 days. Most often, the state agency will allow you to amend the dissolution date at a future time if you are so inclined.
Although LLC’s are a fast growing business entity, there is still a lack of wide spread acceptance of an LLC.
Depending upon the state, there can be restrictions on rendering professional services. In California, an LLC is forbidden to provide any service that requires a professional state license.
How do I decide if I should form an LLC or S corporation?
Most business owners that decide to form a limited liability company do so because of its flexibility in taxation. An S corporation eliminates double taxation but it lacks the flexibility of an LLC in distribution of income to the owners.
A limited liability company can have several classes of membership interests and can consist of one or more members (in most states) which may be individuals, partnerships, limited partnerships, trusts, estates, associations, corporations, foreign nationals, other limited liability companies or other business entities.
An S corporation can only be owned by individuals, issue only one type of stock, and is limited to no more then 75 shareholders.
In California, professional LLC’s are not allowed. By forming an S corporation, you can offer services that require a state license with the benefits of pass-through taxation.
In most states, the filing fees are less to form an LLC than an S corporation. For more information, view our Entity Comparison Table. The Entity Comparison Table will show the advantages and disadvantage of different types of business entities.
It often makes the most financial sense to organize your LLC in the state you are doing business in. Some states offer lower formation fees or have flexible laws that are favorable to business like Delaware. Keep in mind that if you form an LLC in a state other than the one you are doing business in, you will be required to qualify to do business in your home state. In a nut shell, this means that you will have to pay two initial filing fees, pay two Registered Agent fees, file two annual reports, and in some states; pay two state tax fees.
There are some instances when it may be beneficial to form an LLC in another state instead of in your home state. If the LLC is going to be a holding company for investments, it may make sense to form in Nevada because it does not have a state income tax.
If you have decided to conduct business in more than one state, you will be required to qualify “register” to do business in each state. Sun Document Filings can assist you by forming your LLC in the state of your choice and then qualify your LLC to do business in your home state. Please contact us for further information and pricing.
Where can I
view state rules for a California LLC? -
LLC Regulations included
Where can I view state rules for a Delaware LLC? - LLC Regulations included
Where can I view state rules for a Nevada LLC? - LLC Regulations included
Who controls or manages an LLC?
An LLC is owned and organized by its members. Members to an LLC are the equivalent as partners are to a partnership or shareholders in a corporation. Members have the option of managing the LLC themselves or if they prefer, they can choose to elect managers to operate the LLC. Managers are agents of the company and have the authority to bind the company to third parties. The flexibility in management is one of the reasons LLC’s are so appealing.
How many entities or people are required to form an LLC?
In most states, only one entity or one person is required to form an LLC. In terms of taxation, the IRS does recognize single member LLC’s and allows pass-through taxation. Although the Internal Revenue Service allows one member LLC’s with pass-through taxation, some states may not afford equal treatment to single member LLC’s. To avoid any surprises, we recommend that you speak with your accountant or tax preparer to find out how the tax laws in your state would affect your single member LLC prior to organization.
What titles are allowed in an LLC?
In some States, officers of an LLC are limited to members, managers, and Chief Executive Officers (in California). Other States allow offices such as President, Vice-President, and other titles that are generally afforded to corporations.
Are there any restrictions on how I name my LLC?
Yes there is. Most states require that the LLC contain the words limited liability company or limited company or end with the abbreviation LLC, L.L.C., L.C. OR LC.
Most states do not allow a limited liability name to contain the words: bank, trust, trustee, incorporated, inc., corporation, corp., insurer, insurance, or Olympic(s).
In addition to the ending, most states will not allow you to register your LLC if the name is exact or "likely to mislead the public or which is the same as, or resembles so closely as to tend to deceive," the name of a domestic or foreign (out-of-state or country) limited liability company. Sun Document Filings will check the name availability with the State filing agency prior to submitting your documents.
What is a Registered Agent or Agent for Service of Process and why is it required?
A registered agent is typically an individual, business entity, or in some states - a corporation that has filed additional paperwork with the state filing agency so they can become a registered agent. If your LLC is ever involved in a lawsuit, the plaintiff’s attorney and or the court, will serve your LLC via a process server to inform you of the suit. Even though an LLC is a separate entity, it can not answer the door and physically accept the court document in its hand. Therefore, state filing agencies require that an LLC designates a Registered Agent. The state filing agency requires that the Registered Agent maintains a physical address (no P.O. Boxes or PMB’s) in the state the company is doing business in. The Registered Agent is also required to be available at the physical address Monday through Friday during normal business hours to accept service of process. The name and address of the Registered Agent will become public record that anybody can access. Sun Document Filings can eliminate all of the above concerns. For a small annual fee, Sun Document Filings will appoint a Registered Agent to act on your company’s behalf. The Registered Agent will take on the responsibility of being served and forward all service of process to your company immediately. We can act as a California Registered Agent, Delaware Registered Agent, Nevada Registered Agent, and as Registered agent for your company located in any of the 50 states and the District of Columbia. For more information, please click here.
Do I need an attorney to form my LLC?
Legally it is not required. Sun Document Filings can draft, sign as Organizer, and file your documents with the State filing agency. We can also provide your LLC with Registered Agent services, prepare a general operating agreement, and provide you with an LLC kit to keep and maintain your records. We are able to provide all these services at a fraction of the price an attorney would charge. In fact, many attorneys turn to Sun Document Filings to provide them with filing services. We have been trusted in the legal community for over five years to competently organize new LLC’s on behalf of their clients.
However, if you have particular questions about how the laws in your state will affect your LLC, we do recommend that you speak to a competent attorney to answer your legal questions.
What is a publication requirement and are there publication requirements for an LLC?
Some states require that the company publish information about their formation or qualification in a widely circulated newspaper within the county of the State they are doing business in. Currently, the only states that require limited liability companies to publish are Arizona, Nebraska, and New York. Sun Document Filings can help your company meet its filing requirements in Arizona and Nebraska for an additional service fee. Unfortunately, due to regulations and high costs, Sun Document Filings does not help with publication in New York. Please contact us if you are interested in this service. Any Questions? 888-595-2747
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Where can I view an
entity comparison table?
Where can I view a glossary of corporate terms?
What about a corporation? Where can I view FAQ's about a corporation?
At the federal level
An LLC may be classified for Federal income tax purposes as a sole proprietorship (referred to as an entity to be disregarded as separate from its owner), partnership or a corporation. If the LLC has only one owner, it will automatically be considered to be a sole proprietorship (referred to as an entity to be disregarded as separate from its owner), unless an election is made to be treated as a corporation. If the LLC has two or more owners, it will automatically be considered to be a partnership unless an election is made to be treated as a corporation. If the LLC does not elect its classification, a default classification of partnership (multi-member LLC) or sole proprietorship (single member LLC) will apply.
At the state level - LLC Tax
Your LLC may be treated differently for tax purposes then at the federal level. Some states impose an annual tax or attach an additional tax depending upon your LLC’s gross receipts. In California, the Franchise Tax Board imposes an $800.00 minimum tax that is due within 4 months after formation. In addition, the LLC will be required to pay the minimum tax every year for the life of the LLC. Any Questions? 888-595-2747
Since each state is different, we recommend that you speak to your accountant or tax preparer for specific tax questions.
How do I start the LLC
formation process?
Please click on a link below for forms, fees, and further information.
Form a
California LLC - Form a California LLC fast
Form a Delaware LLC
Form a Nevada LLC
Form a California Corporation
- click here for more information
Sun Document Filings suggests that you seek the advice of an attorney or accountant to answer any legal or tax questions you may have.
NOTE: We hope you find our LLC FAQ's helpful. Nothing contained in our FAQ's should be construed as giving legal or financial advice. Our intended audience is attorneys and accountants. Therefore, if you are not an attorney or accountant, you should contact an attorney or accountant for specific legal or tax questions regarding your LLC. Please be aware that the Franchise Tax Board and Secretary of State are government agencies and can change their fees/procedures/forms/turnaround times without notification. Although we do our best to update our steps and stay current, we shall not be held liable for any omissions or errors contained. We do not profess to be giving legal or financial advice to the general public as we are a typing and filing agency.Any Questions? 888-595-2747
