Starting a business involves significant planning. One of the first choices you have to make is your business structure. A limited liability company, LLC, is one of the most common structures and for good reason.
What is an LLC and why do so many businesses choose it? An LLC protects you as a business owner by limiting your liability involving company obligations and debt. An LLC gives you the flexibility to run your company according to your terms instead of following certain requirements like a strict meeting schedule and corporate records.
Are there tax benefits to choosing an LLC?
An LLC also has some tax advantages. You may be able to change how income is distributed each year and maintain investors in your company depending on your specific situation. Another reason why an LLC is beneficial is because LLCs are not taxed at the federal level, since an LLC is not recognized as an “entity” for federal tx purposes. You will need to be taxed as a partnership or corporation at the federal level. You are still able to file a tax return as an LLC in your state tax filing.
As the business owner, you will pay personal income taxes based on the profits and losses of your business. This should allow business owners to maximize their profits in most cases.
How do you establish an LLC?
Once you decide you want to form an LLC, you will need to do the following:
- Choose your business name
- Write your operating agreement
- File a copy of your Articles of Organization and publish it in two newspapers for six consecutive weeks
- File a Biennial Statement with updated contact information every two years with the New York Department of State
Your attorney can help you follow these steps and make sure your business plans and documents are accurate and up-to-date.