How to Form an LLC and Information to Know
Why should I form an LLC? How do I form an LLC? What are the advantages of forming an LLC? These are all questions many of us ask ourselves at some point in our business ventures and have no clue what the answers are. For those of you that don’t know, LLC stands for limited liability company. Becoming an LLC has many advantages to it. Plus, it’s not as hard to form as most believe it is.
Process:
To form an LLC, you must do the following.
1. Choose your business name. Keep in mind that this must comply with your state’s LLC rules.
2. You must file the proper paperwork and pay the filing fee. You can expect the filing fee to be in the $XXX range varying from state to state. I highly recommend you file to become an LLC in your own state so you will not have to pay income taxes in 2 states (but that’s for another article).
3. As required by state law, you must create an LLC operating agreement. This will state the rights and responsibilities of the members of the LLC.
LegalZoom.com is a great way to get the proper paper work and direction to file your LLC, so make sure to check them out. Also, keep in mind that some states do have extra requirements you must fulfill that I’m not going to go into right now, but those are the main 3 steps to form your LLC.
Advantages:
Below is a list that I compiled of a few of the many advantages of forming an LLC.
- Pass-through taxation.
- Owners’ assets are protected from any of the company’s financial debt or downfalls.
- You don’t need more than 1 person to form an LLC.
- None of the executives’ power is begin lost.
- LLC’s aren’t “dropped” when an owner or the owners die.
- There isn’t as much recordkeeping required.
I’d love to get your comments on all of this. Especially if you own an LLC, which many domainer’s do, share your experiences and likes and dislikes. Submit your comments below!
I filed mine in Nevada for privacy purposes, but I totally agree and of course now realize that paying income taxes in 2 states is no fun!
Forget Legal Zoom. Every state has a website with instructions and the necessary downloads to form your company.
Also worth considering is an S-Corporation.
Alex
Domainer Nation, LLC
The best two reasons are the liability shield and the more legitimized tax deductions.
If you own a premium or super premium domain or website then having it in its own LLC would be a good shield against any potential liability (trademark, libel, etc..) You can also better allocate expenses and capitalize assets into your cost of the domain (such as web development, seo consulting, etc). An LLC will also make your domain business more legitimate in the IRS’ eyes and will help you pass the hobby or business test that the IRS is thought to subject your business deductions.
Having said that, you should keep your personal non business expenses separate from your LLC business expenses and treat the two differently in order to maintain the LLC status.
I am not an accountant or a lawyer. Just my .02.
BTW – I had to rewrite my comment three times. Every time I was half way through my comment and navigated away to another window I had whatever I wrote deleted and had to start over. Perhaps it’s a plugin glitch or something. Just a heads up.
I would highly recommend consulting an accountant and thoroughly if and when you set up a LLC. I have one and the state of Maryland still wants its business taxes on a quarterly basis normally based on any profits or sales the business generates during the fiscal year. Your state may be the same or different.
Also, I learned the IRS still doesn’t “formally” recognize LLCs on their own. You have to file taxes as an LLC “sole proprietor” or LLC “corporation” based on how your business is structured. It is important to have a tax professional on you team if you want to take full advantage of your deductions, depreciation, etc.