While most business entities can form an LLC, not all can legally do so. Federal law prohibits banks and insurance companies from becoming a limited liability company. On state levels, the rules and regulations surrounding LLC formation vary. Generally speaking, however, sole proprietors, partnerships, S-corporations, and C-corporations can all restructure their business to form an LLC.
There are many advantages to forming an LLC. The distinction between business assets and personal assets is one of the primary benefits. Members’ homes, bank accounts, cars, and other personal assets are protected from creditors if the company incurs too much debt or if the company is sued for any reason.
Filing less LLC paperwork is another benefit. Unlike corporations, LLCs do not have rigorous recordkeeping requirements. For instance, many states do not mandate LLCs to file annual reports.
Limited liability companies also enjoy pass-through taxation, meaning taxes are only paid on personal profits rather than on the company level. Profit distributions to members are also more flexible, making the overall tax liability significantly less than that of a corporation.
If you are still unsure of which business structure is most advantageous for your company, take our survey before you apply for LLC status.
Forming an LLC is simple using GovDocFiling. Whether you are starting a new business or converting from a sole proprietorship or corporation to the LLC business type, our easy-to-use system guides you through every step of the process, starting with the EIN form. Don’t spend more time than necessary wading through all the paperwork required by the IRS.; our tax specialists know the intricacies surrounding the formation of LLCs and are happy to put our expertise to work for you so that you can focus on making your business a success.