LLC (Limited Liability Company)

The flexibility you want for your business with the protection you need.

  • Protection of your personal assets
  • No taxes at the corporate level (pass-through taxation)
  • Ability to structure your company to fit your needs

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What is an LLC?

An LLC, Limited Liability Company, is one of the most common entity types utilized by businesses.  This is because it is a flexible business structure, which protects your personal assets from being at risk.

IRS Definition of a Limited Liability Company (LLC): A limited liability company (LLC) is a structured allowed by state stature. An LLC is formed by filing articles of organization with the individual state’s secretary of state. Properties of an LLC Include:

  • Owners of an LLC are called members. Members may include individuals, corporations, other LLCs, and foreign entities.
  • An LLC can be formed by one or more members, there is no maximum number of members.
  • There cannot be more than one active LLC with the same name in the same state.
  • For federal tax purposes, an LLC must choose to be treated as a partnership or a corporation, or be disregarded as an entity separate from its owner or owners.

Taxation of an LLC:

If only one person is establishing an LLC, then it is called a Single Member LLC. Single Member LLCs are taxed as a Sole Proprietor, meaning profits and losses are passed through to the individual’s federal tax return to the IRS, on their form 1040.

If there is more than one person as members of the LLC, then it is referred to as a Multi-Member LLC, which by default is taxed as a Partnership, meaning that profits and losses are passed through to the individual members’ federal tax returns.

Members of an LLC can also elect to be taxed as a corporation instead of a partnership:

  • LLCs can elect to be taxes as a C-Corp – Profits and Losses from the LLC are reported on Tax Form 8832
  • LLCs can elect to be taxed as an S-Corp – Profits and Losses from the LLC are reported on Tax Form 2553

Limited Liability Companies are also taxed on the State level, which varies from state to state. For example, in California, there is an annual $800 tax for all LLCs, as well as an income based annual fee if the LLC earned more than $250,000 in a tax year. The $800 tax for LLCs is a reason many small business may not elect to form an LLC, if the benefits of liability protection do not outweigh the cost of the state tax. Visit the Department of Revenue for your state to find out what state taxes are required of Limited Liability Companies in your state.

If a husband and wife form an LLC together, in some states, they can elect to be classified as a Single Member LLC for federal tax purposes. California is one of the states where a husband and wife can elect to be a Single Member LLC.

LLC – Liability

Arguably the biggest reason to form an LLC is because of the liability protection it provides. LLCs provide limited liability protection to their owners (members), who are generally not personally in charge of the company debts and obligations of the LLC.

Lenders cannot pursue the personal assets of the owners to pay company debts, such as homes, savings accounts, or properties. In general partnership or a sole proprietorship, the company and owners are legally considered the same—leaving personal assets exposed. Members of an LLC are not liable for satisfying the debt of the LLC. The personal assets of the members of the LLC are not at risk.

Limited Liability Companies vs Corporations

  • Minimal compliance requirements: LLCs face fewer yearly and on-going state enforced demands than S-Corporations and C-Corporations.
  • Flexible management arrangement: LLCs are free to establish any organizational structure agreed upon by the business owners. LLCs can be managed by the owners or by supervisors, unlike corporations which have a board of directors who supervise the important business decisions of the firm and officers who manage the day to day issues.
  • Very few restrictions: There are few limitations on who can be an LLC owner or how many owners an LLC may have (unlike S corporations).

Benefits of an LLC

  • Protected Assets: LLCs provide limited liability protection to their owners (members), who are generally not personally in charge of the company debts and obligations of the LLC. Lenders cannot pursue the personal assets of the owners to pay company debts, such as homes, savings accounts, properties. In general partnership or a sole proprietorship, the company and owners are legally considered the same—leaving personal assets exposed.
  • Pass-through tax: LLCs generally do not pay taxes on a company or business level. Any business income or loss is ‘passed through’ to owners and reported on their personal income tax returns. Taxes are paid out on an individual level.
  • Heightened credibility: Forming an LLC may help a fresh company create credibility with associates, workers, sellers and prospective customers because they find you’ve made an official commitment to your company.
  • Minimal compliance requirements: LLCs face fewer yearly and on-going state-enforced demands than S corporations and C corporations.
  • Flexible management arrangement: LLCs are free to establish any organizational structure agreed upon by the business owners. LLCs can be managed by the owners or by supervisors, unlike corporations which have a board of directors who supervise the important business decisions of the firm and officers who manage the day to day issues.
  • Very few restrictions: There are few limitations on who can be an LLC owner or how many owners an LLC may have (unlike S corporations).

Quickly Obtain an EIN for Your Limited Liability Company

Obtaining an EIN for a Limited Liability Company has never been easier. Gov Doc Filing allows you the freedom to simply enter your information and our EIN and Tax Specialists get busy filing all of the appropriate paperwork with the IRS, with 100% accuracy, so that nothing is left to chance. You could attempt to file all of the necessary paperwork on your own, but who has the time for that in the midst of building a business? You have a company to manage, leave the lengthy details up to Gov Doc Filing.

To get an EIN for an LLC, you will need to submit an EIN application with the IRS. One of members of the LLC will be required to be the “managing member” for the purposes of the Tax ID, and will need to provide their legal name and social security number.

Start LLC Tax ID Application

Select Entity Type

The first step is to choose which entity classification is right for your business. If you are unsure, take the easy survey and find out which one if best for you!

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Get Tax ID Number

The second step is to submit an application for a Tax ID number from the IRS. You will receive your Tax ID online, quickly and easily.

Start Application

Form your Business

The next steps can vary depending on the business. Get free business tips, resources, and articles straight to your inbox. Cancel anytime.

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