Starting your LLC can be a daunting thing, even if the process to do so is very simple. This is because any new venture can be so, especially if you go into it with certain questions in your head. Given that, here are some answers to some of the unknowns you might be wondering about:
- Where should you form your LLC? How your LLC is taxed on the state level will vary from state to state. As such, it is important that you think carefully about where you want to form your business. During this process, consider both tax advantages and incentives that varying states have to offer and which markets you will be going into.
- Is there actually a difference between an LLC and a sole proprietorship? In a sole proprietorship, the owner personally owns all business assets and the business itself. This means that they are personally liable for any debts and lawsuits, which is something that can put their personal assets on the line.
- What is a professional LLC? In some states, some professional practices are not actually allowed to form standard LLCs. In these cases, those practices have to form what are known as professional LLCs. This rule applies to those individuals who work as doctors, architects, chiropractors, lawyers, and accountants. There is not a huge difference between professional LLCs and regular ones. The main point of differentiation is that the former has to hold a professional license to conduct business while the latter does not.
- What is a series LLC? A series LLC is an entity that allows assets, membership interests, and operations to be divided into series that are independent of one another. In such cases, each of these series operates as a separate entity and has a unique name and bank account, as well as separate records. Series LLCs are often used by real estate investors who want to own multiple properties.
- Do you need to have a business partner to start an LLC? By now, you’ve probably gathered that the answer to this question will be “no”, seeing as we’ve already discussed the existence of single-member LLCs and all. One of the great things about LLCs is that you neither need a partner nor any members to be able to form one. Owing to this, many people start their LLCs as sole proprietorships, meaning entities where they are the sole owner and operator. Doing this can be a very effective way of getting your company started, especially if you are hesitant about working with a partner.
- Do you need to be of a certain age to be able to form an LLC? Usually, anyone and everyone including minors can own LLCs. However, some states, such as Colorado, Illinois, Minnesota, Oregon, and Texas.
- Are you allowed to have more than one member in an LLC? As you may recall from the earlier mentions of multi-member LLCs, you are definitely allowed to have more than one member in a limited liability company. This means that your LLC can have more than one member if you want it to. The LLC can have also any number of members. So, if you were to start one out with a set number of members, you can always increase it and add to it as time goes on.
- How long does it take an LLC forming? Considering how simple the process of forming an LLC is, it should not be surprising to hear that starting yours will not take all that long. This is another one of the benefits that LLCs offer. In most states, filing all the necessary paperwork and launching your LLC takes about a couple of business days, max. So, if you want to launch a business but do not want to wait for months, if not years for it to take off, then this kind of corporation is for you.
- How much money an LLC forming can cost? Another great benefit of LLCs is that starting one is not all that costly. In most states, you can launch your LLC by spending just a couple of hundred dollars. This makes LLCs a great option for those individuals who are on a tighter budget or just do not want to spend thousands of dollars to form their LLC.
- Do you need to be a citizen of the United States to be able to form an LLC? Actually, you do not. In fact, most of the people who start LLCs in the US are not citizens at all. Many are residents or resident aliens and foreigners as the immigration system calls them. This makes LLC a great option for people who’ve started businesses outside of the US but want to expand into the States without having to struggle with getting a green card or visa.
- Do you need to have an office space to start an LLC? Actually, a lot of people who start LLCs in the US either work from the comfort of their homes or out of places like coffee shops. So, you really do not need a physical office space to form your LLC. You can keep the extravagant sums you would have spent on renting an office space and either save it or use it for something else.
- Are there any annual costs? One of the downsides of limited liability companies is that you have to file annual reports when you start one. Another is that you have to pay an annual fee to keep it operational. Though this fee varies from state to state, it usually is not that much and never really exceeds $100. Some states may require you to pay bi-annual fees—meaning once every two years—rather than annual fees. Some may even ask you to pay tri-annual fees, meaning once every three years. If you want to know for certain how much and how often you need to pay, you should, yet again, check your Secretary of State’s website.
- Are there any other state laws that you need to comply with? Yes, but you need to check the Secretary of State’s website to find out what they are, seeing as they are bound to vary from state to state. It is important that you familiarize yourself with these laws as failing to abide by them can incur serious penalties. It can also lead to the dissolution of your LLC.
- Do you need liability insurance? While getting liability insurance is not a requirement for forming an LLC, like creating an operating agreement, doing so is a good idea. This is because such insurance can protect you from possible financial damage in the future. You might incur such damages, for instance, if your limited liability company ever gets sued or is involved in an accident. If you do not have liability insurance in cases like this, you might ultimately find yourself on the hook for thousands of dollars. So, why not cover your bases, prepare for the worse but aim for the best?
- Can you hire employees after your LLC is up and running? Of course you can! You can decide to hire as many employees as you would like after you have officially formed your limited liability company. If you are hiring employees, however, you should know that there are a couple of things you need to do to comply with both state and federal laws. For starters, you’ll have to get workers’ compensation insurance for your employees. Afterward, you will need to withhold taxes from your employees’ paychecks and then pay those taxes to the government on their behalf.
- Can one LLC own another LLC? Actually, one LLC can indeed own another (Watts, 2021) and this can happen in a multitude of ways. A limited liability company may be shown as the designated owner of another LLC while the paperwork for that second business entity is being filed, for example. Alternatively, one LLC may end up buying another.
- Do you have to do market research before starting your LLC? Yes, you do have to do market research before starting your LLC, that is if you want it to be a success. To that end, you need to conduct a competitive analysis of the market you are entering. This analysis should look at factors such as market size, demand, location, prices, market saturation, business trends, and economic signs (Phelps, 2022).
