A Limited liability company (LLC ) is a business entity that offers limited liability protection and pass-through taxation. As with corporations, the LLC, legally exists as a separate entity from its owners. Therefore, owners cannot typically be held personally responsible for the business debts and liabilities.

The LLC allows for pass-through taxation, as its income is not taxed at the entity level; however, a tax return for the LLC must be completed if the LLC has more than one owner. Any LLC income or loss as shown on this return is passed through to the owner(s). The owners, also called members, must then report the income or loss on their personal tax returns and pay any necessary tax.

Typically, there are no residencies or legal restrictions as to who can start an LLC. However, a few states impose requirements that members and/or managers must be at least 18 years of age, or the age of consent. For more information regarding the requirements of each state, view the LLC Formation Requirements page of our state guides.

While the S corporation and LLC both have pass-through taxation, the S corporation lacks the flexibility of an LLC in allocating income to the owners. Additionally, an LLC may offer several classes of membership interest while an S corporation may only have one class of stock.

In terms of number of owners, any number of individuals or entities may own interests in an LLC. However, ownership interest in an S corporation is limited to no more than 100 shareholders. Also, S corporations cannot be owned by C corporations, other S corporations, many trusts, LLCs, partnerships, or nonresident aliens. Finally, LLCs are allowed to have subsidiaries without restriction.

There are also differences in the handling of employment/self-employment taxes.

No, you can prepare and file the Articles of Organization (one of the most important LLC forms needed) yourself. Be sure you understand the requirements of your intended State of incorporation. You can use Initial Mile  Service’ to form your LLC, complete your LLC forms. If you are unsure of what business type is best for you, review our Types of Business Comparison Table and/or try our Incorporation Wizard. If you still have questions, consult an attorney or accountant

A registered agent is required when you start an LLC or register to transact business in another state (a process called “foreign qualification”). Initial Mile  includes Registered Agent Service with its incorporation service packages

Ensuring your privacy. When a company is served with a Service of Process, it is often delivered by local law enforcement. Most business owners do not want police officers showing up in front of customers, employees, or neighbors (in the case of a home-based business), to serve them notice that their company is being sued. Having Initial Mile  as your Registered Agent Service Provider ensures you receive any Service of Process promptly and privately.

Maintaining a registered office and normal business hours. The Registered Agent for a business must be available during normal business hours to accept important documents as they are delivered. If you set your own hours, or you are often away from your office or home-office, having Initial Mile  as your registered agent ensures that you never miss these important communications.

Typically, LLCs are taxed like partnerships, with pass-through taxation. While multi-member LLCs must file an informational tax return, single member LLCs do not. In both cases, the profits or losses are “passed-through” the business and reported on the owners’ tax returns. Any tax due is then paid by the owners at the individual tax level.

LLCs can also elect to be taxed like corporations, where the profits of the LLC are taxed at the business level. The State income tax treatment of LLC profits and losses may or may not mirror the IRS tax treatment depending on the State. For more information on your State tax obligations, contact us with your inquires.

LLCs are also subject to any franchise taxes imposed by the State of Incorporation. A franchise tax is a tax imposed for the mere privilege of being an LLC incorporated or registered to transact business (through a process called ‘foreign qualification’) in that State. Franchise taxes are typically due annually, and the amounts differ by State. The first payment must be made within 3 months of forming your LLC. The State will send a bill to remind you to make this payment.

After you decide to form an LLC, Articles of Organization LLC forms must be filed, and state and initial fees must be paid. Initial Mile ’s LLC Formation Service packages handle these steps for you.

After your LLC forms are filed, it is recommended that your LLC hold an organizational meeting of the members/managers. This meeting will help to start an LLC by adopting an operating Agreement, issue membership interest certificates to members, and undertake other preliminary matters such as authorizing the opening of a bank account for the LLC. View our article on Business Compliance Requirements to learn more.