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When starting your new business, one of the first and most important steps is to figure out what kind of entity you are going to be for tax purposes. There are several varieties, such as sole proprietorship, partnership, and corporation, but many new business owners opt instead to form a limited liability company, otherwise known as an LLC. Today we’ll go over the benefits of an LLC as well as how to start one.
What is an LLC?
Simply put, this is a business that is directly tied to its owners rather than being a separate entity. As such, it can have a lot more flexibility and be easier to set up, but it can also be limiting in the long run if your business changes or anyone leaves. Let’s look at the basics of filing for a business as an LLC and why it can work for you.
Tax Flexibility
One of the biggest reasons that people choose to form an LLC is that it can be taxed as a sole proprietorship, partnership, or a corporation. There are reasons to do each method, so it will depend on your particular business setup to see which one will work best for you. Again, the LLC is tied to the owners, so no matter what it will have to be formed with each investing partner involved in the paperwork. To do this, you will usually need an operating agreement that outlines the specifics.
Easier to File
Unlike a corporation, filing for an LLC doesn’t involve as much paperwork. The reason for this is that the company is not under as much scrutiny as a corporation or non-profit, so there is less involved in keeping it in good standing. As long as you have an operating agreement in place, the rest should be relatively easy.
How to Start an LLC If you want to create this type of company, you can do so online through sites like www.govdocfiling.com. There you will have access to all of the necessary paperwork required to file, and you can get an employer ID number within about an hour or so. As far as the operating agreement goes, that will have to be done separately, but it shouldn’t take long to create.
Overall, an LLC is a great way to start a business if you want something simple, but just be aware that if a partner leaves, you will usually have to refile as a new entity.