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Wednesday, September 28th
A limited liability company (LLC) is an effective way to get the protection of a corporation while operating your business as a sole proprietor or corporation. Like a corporation, the LLC is an entity that is separate from its owner for legal purposes. Therefore, if a judgment is rendered against your company, only its assets can be used to satisfy it. As a general rule, you should be able to form an LLC online regardless of the state where it is created.
How to Form an LLC Online Yourself
You can form an LLC online on your own by visiting the website for the state agency that deals with the creation of such entities. You will be required to submit organization documents that contain basic information about your business. The document will tell the state who your company's members are, where it is located and what its name will be.
If you are planning to create an LLC of your own, you will be able to submit these documents electronically through the appropriate state website. You will likely be contacted through the state's electronic portal, by email or by mail when all necessary paperwork has been processed. If there are any issues with your organization documents, you will be asked to correct them before your LLC is officially recognized.
In most cases, you will be charged a fee to create an LLC in your chosen state. This fee is typically assessed at the time that you submit your organization documents. In the event that your company is not allowed to operate as an LLC, this fee may be refunded.
How to Create an LLC With the Assistance of an Outside Entity
It's not uncommon for business owners to be highly effective at creating goods or services while feeling wholly uncomfortable about the legal side to running a company. If this sounds like you, it may be in your best interest to turn to an attorney or outside company to help you create your LLC.
The primary benefit to doing this is that you'll have someone to turn to when you have questions about the process of organizing your company. Of course, it's worth noting that an attorney or other entity will likely charge a hefty fee to complete this process on your behalf. This fee will be in addition to any fees that a state government charges to process paperwork or otherwise allow your LLC to operate within its borders legally.
If you do decide to partner with an outside entity, you will typically be responsible for providing the information that goes on the organization forms themselves. After providing that information, your representative will file those forms and deal with any problems that might arise after they are submitted.
What Are the Advantages of Creating an LLC Online?
One of the primary advantages of creating an LLC online is that you should be able to fill out and submit all necessary documents in a matter of minutes. In some cases, it may even be possible to receive confirmation that your documents have been processed and approved within hours. However, it will likely take a couple of days before you know if your organization has received LLC status.
Submitting documents through an electronic portal can be beneficial because you can keep track of when they were submitted and if they have been received. If you submit paperwork by fax or through the mail, there is a chance that they could get lost, stolen or otherwise routed to the wrong place.
Typically, you will receive a confirmation message when your paperwork has been submitted. The message will often contain a timestamp indicating exactly when this happened. This can be especially helpful if you delegate the LLC formation process to an outside entity as it verifies that services have been rendered on your behalf.
You Can Usually Submit LLC Documents Outside of Typical Business Hours
As a general rule, most government offices close at 5 p.m. This means that if you also work during typical business hours, you may have difficulty submitting LLC paperwork in a timely fashion. Fortunately, you can typically submit these documents online at any time. Therefore, you can wait until after your shift is over to complete the process of legitimizing what might currently be classified as a side hustle. It is worth noting that documents that are submitted outside of business hours may not be reviewed until the following business day.
What Happens After LLC Documents Are Processed and Approved?
After your LLC documents are processed and approved, you will be granted the full rights and protections bestowed on such an entity. In the states of New York, Nebraska and Arizona, you'll need to publish a notice in a daily or weekly newspaper for up to six weeks after your company officially obtains LLC status.
Failing to meet the publishing requirement may result in the suspension or termination of your LLC. It's important to understand that you must generally create your LLC in the state where it has nexus. For instance, if it was headquartered in New York, you would need to create your LLC there.
Do I Need to Submit an Operating Agreement?
It's unlikely that you will need to submit a copy of your company's operating agreement. Furthermore, there is no requirement to send a copy of your business plan or partnership agreement if your company has one. However, it is in your company's best interest to have an operating agreement and business plan written up. Having these documents may help to avoid conflicts between members or make it easier to resolve any conflicts that do arise. If you are the only member of your LLC, it is still a good idea to have a formal business plan because it will help you make key decisions in a confident and timely manner.
Do I Need to Elect a Tax Status When I Submit Organizing Documents?
If you are the only member of your LLC, it will be treated as a disregarded entity for tax purposes by default. This means that it will be taxed the exact same way it would if you ran your company as a sole proprietor. If you have more than one member, it will be taxed like a partnership by default.
In either case, the profits or losses generated by your business will flow through to your own tax return. To change your LLC's tax status, you should file Form 8832 with the IRS as quickly as possible. Doing so will allow you to be taxed like a corporate entity.
It's important to note that profits or losses that a corporation generates do not flow through to your personal tax return. Instead, they are taxed at the corporate level with any remaining funds distributed to members as either wages or dividends. An exception would be made in the event that you choose to be treated like an S corporation.
In such a scenario, profits or losses would not be taxed at the corporate level. Furthermore, you may be able to take a portion of your salary as an owner's draw, which is treated like ordinary income as opposed to wage income.
Peace of mind
Creating an LLC can be an effective way to minimize your personal liability without having to operate your company as a corporation. Completing the LLC creation process online allows you to do so in less time. Filing online also reduces the odds that anything will be lost or stolen, which can provide significant peace of mind.
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