Author : Jo Ann Joy
The entities to choose from are:
Sole ProprietorshipsGeneral partnershipsLimited partnershipsC and S corporationsTrusts, andLimited liability companiesThe factors that affect the choice of entities are:
income tax and asset protection consequencesease and cost of formationnumber of ownersrestrictions on ownershipprivacy, control, managementowners' protection from liabilities of the entityLimited Liability Company Formation
Protect personal assets and incomeLimit liability to the assets of the companySeparate your business and personal assets and liabilitiesCreate an entity in perpetuity Benefits of a limited liability company
All the protection of a corporation without:
Annual meetings or minutesAnnual reports or annual feesStock to classify and issueAnd with
Less expense to formLess government oversightMembers' liability limited to their share of LLC's capitalCreditors and judgment creditors cannot collect from personal assetsUnlimited members unless S corporation election; then limit is 100 membersDisproportionate distribution to membersPLLC only requires one member who can also be managerLLC Formation
Reserve unique nameName must include the letters LLCLicensed professionals must use PLLCPrepare and file Articles of OrganizationAppoint Statutory agentChoice of taxationChoice of managerChoice of number of membersChoice of member responsibilitiesOpen LLC bank accountSet up separate books for companyObtain Corporate Commission approval of articlesPublish articlesFile Affidavit of PublicationObtain federal and state tax ID numbersObtain state and local sales tax licenses, if neededPrepare operating agreementOperating Agreement
Required by lenders, plus personal guarantyRequired for multi-member LLCsAvoids disagreements about company's operation and management, capital requirements, profit sharing, member responsibilities, managementSets up methods of dispute resolutionSets up how capital is raised and profits distributedMajor Provisions of Operating Agreement
Rules for admitting new membersRules to terminate members' interestsRules about member withdrawalRules about transfer of company interestsRight of first refusal on transfersRules for allocation of profits and lossesRules for member contributionsRules about the company's right to incur debt and loan to membersAn LLC can be taxed four ways
Note: All tax questions should be referred to a tax professional
As a separate legal entityAs a partnershipAs an S corporation As a C corporation Note: Most states follow the IRS in imposing taxesAn LLC can be taxed as a partnership or an S corporation by which the taxes pass through the company and are taxed to the individual owners of the LLC at their individual tax rates. Indigo Business Solutions can provide you with the legal guidance to help you choose the right entity for your company. For more information about these and other important topics and for legal consultation, please visit our website at http://IndigoBusinessSolutions.Copyright 2006. Indigo Business Solutions is a registered trade name.Jo Ann Joy is the CEO and owner of Indigo Business Solutions. She has a law degree and an MBA, and an undergraduate degree in Economics. Her background includes commercial and real estate law, accounting, financial planning, mortgages, marketing, product development, budgeting, sales and banking. She ran a successful business for 10 years, and she has written and given presentations on various business subjects.
Keyword : Legal Entity, Limited liability company, legal advise, small business entity
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