How to properly structure your business -
Setup an LLC (Limited Liability Company)
You can start a business without setting up an LLC, however I don’t recommend it. Every business needs some form of protection, it doesn’t matter if you cut grass or cut hair.
Also having an LLC for your business provides you with certain financial and tax benefits that you don’t get without having an LLC.
A LLC is a legal entity that protects the owner from being personally liable for the debts and obligations of the company. It is a hybrid entity, meaning it has characteristics of both corporations and partnerships.
An LLC is typically taxed as a partnership, meaning that its profits are not taxed at the corporate level but instead are passed through to each individual owner and then taxed on their personal income tax returns. An exception to this rule is when an LLC elects to be treated as a corporation under Sub chapter S of the Internal Revenue Code.
A limited liability company (LLC) can be formed in any state by filing articles of organization with that state’s secretary of state or similar office. The articles must include: The name of the LLCThe LLC’s governing documents, which set out its rules and responsibilitiesA plan for managing the LLC’s affairs and taking care of any business activities it will carry onNotice to members about their limited liability in the company, what debts they personally owe, and how much personal liability they have for each other’s obligations.Identification information such as names, addresses, tax identification numbers (TIN), etc.
LLCs are a popular option for small businesses. They are often used by freelancers, contractors, consultants, and other small business owners who don’t need to have their own office space. .LLCs are also used by investors and their small businesses, thereby turning a sole proprietorship into an LLC. This is sometimes done in order to reduce the tax liabilities of the business.Another way that an LLC can be formed is if there is a company within the company. For example, if Company A has its own manufacturing division that needs to protect its assets, then it could form Company B and create an LLC for Company B instead of a sole proprietorship for Company A.
To break it down in one sentence: An LLC separates you from your business just in cast you get sued.
Can you open your LLC in a state you don’t live in? YES. You can open your LLC in any state you choose.
How much does a LLC cost? The cost of a LLC is the cost of that states registration fee. Which depends on the state you choose to register your LLC in. Filing companies charge processing fees to file all the proper paperwork on your behalf. However, if you are willing to do the work the state registration fee is your ONLY cost.
Which state is the best to open a LLC in? The cheapest is Michigan. However in my opinion the states that offer the best protection for you and your business is Delaware, Wyoming, and Nevada.
Properly setting up your LLC can be done COMPLETELY FREE minus the state fee. All the proper paperwork can be filled out and filed with the IRS and the state of your choice by you. Significantly reducing the overall cost.
I recommend using one of the filing companies below.
Nevertheless, before you file any paperwork with the IRS, State, or filing company I recommend taking 2 additional steps:
- Setup a virtual address for your business
- Setup a virtual phone number for your business
When you choose a name for you company, choose something that would look professional on a bank application.
- Are You having trouble trying to come up with a name for your business or company. Click here for a free Business name Generator