LLC vs. Incorporation: the Cost-effective way of establishing customer credibility
A Limited Liability Company is possibility every businessman’s dream. By forming an LLC, industries ranging from real-estate to construction will acquire a lot of benefits and give more opportunities for the organization and its clients.
For many who don’t know what an LLC is, this is the brief description. LLC is a business structure that allows your company to enjoy legal responsibility like that from a corporation while staying away from annual reports, share distributions, bylaws, and other requirements when establishing a company.
Forming an LLC is useful especially to new firms. It merges control and tax advantages of a partnership while enjoying the advantage of limited accountability. LLC members are protected from liability for business debts or claims. An LLC is more flexible than a corporation since owners can be individuals, trusts, partnerships, corporations and non-resident aliens. Plus maintenance is easy; LLC has much less formalities and easier than running a corporation.
Differences of forming an LLC vs. Incorporation
– Corporations are owned via share of ownership or stocks that are given to stockholders. An LLC, like partnerships, is simply owned by the members or the managers of the firm.
– Unlike an LLC, corporations require holding annual meetings and keeping written minutes. There is much less paperwork in LLC since they don’t have those requirements.
– A corporation must pay taxes for their profits at the corporate tax rate. An LLC in contrast is a “pass-through” tax entity. Meaning the profits or losses produced by the company will show up on the personal income tax return of the owners. Double taxation of paying corporate tax and personal income tax therefore are warded off.
What you should expect after filing an LLC
After you have decided to apply for an LLC, you will receive two articles with a CD explaining the documents. The two articles are the Articles of Organization and the operating agreement. They will come along with the corporate or LLC kit.
The Articles of Organization formalizes your existence under state law. Upon having filed this, you’ve got a legitimate business ready to go.
This document declares the name, purpose, incorporators, amount and types of stock that may be issued as well as other special characteristics of the business entity. The Operating Agreement on the other hand, offers the written rules for conduct of the LLC. Examples include meetings, elections of a board of directors and officers, notices, types and obligations of officers, along with other standard protocol.
You’ll also have a registered agent who is able to acknowledge official documents for you. Examples of the documents you’ll be receiving are tax notices, annual reports and legal-process documents such as summons, etc.
The last steps include things like filing for an Article of Amendment to reflect the growth of your company from a corporation to an LLC. You also need to file an Initial or Annual Report. Business filing experts will help process needed changes in your organization.
Tullio Ferrante is an entrepreneur who uses the process incorporation and is contemplating forming an llc.
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