Three Things To Understand Before Forming An LLC [Infographic]

October 18, 2020
If you’re considering starting a business you might be researching how to start an LLC. LLCs are gaining popularity and…...
Three Things To Understand Before Forming An LLC [Infographic] featured image

If you're considering starting a business you might be researching how to start an LLC. LLCs are gaining popularity and offer good advantages for business owners. This infographic is your map to your best decision...

Guest post by Brett Shapiro

Essential LLC Facts Small Business Owners Need To Know

Are you an individual starting a business by yourself for the first time? Then, you are likely to have a lot of questions, especially about which business structure to choose.

LLCs (limited liability companies) have recently gained a lot of popularity in the United States due to their simplicity and flexibility. Forming one offers:

  • Pass-through taxation
  • Limited liability
  • Flexible management structure

If you plan to start a business, there are some essential facts that you should know about limited liability companies. Here are three things to understand before forming an LLC.

1. They Are Easy To Form

Forming a limited liability company requires minimal documentation and offers a lot of flexibility in terms of taxation, management, and operations. And the good news is that all fifty states allow you to form this type of entity.

How to apply for LLC?

All you need to start a limited liability company is to file the Articles of the Organization with the Secretary of the State’s office. You should also obtain an EIN/Tax ID for taxation purposes.

2. They Offer Benefits To Business Owners

As a business owner, there are LLC advantages.

A limited liability company can consist of one or more members (owners). Tho can be individuals, corporations, other LLCs, or foreign entities. However, banks and insurance companies cannot be a part of one.

As an owner, you can choose to run:

  • A member-managed LLC (where all members collectively make decisions)
  • A manager-managed LLC (where an appointed manager will make all business decisions)

3. Profit Sharing Is Easier With An LLC

You don’t need to distribute profits equally every time. You can decide a profit distribution model as per your individual business needs.

By default, LLCs follow a profit distribution model where profits are divided in the same proportion as ownership interests. For instance, if three members own 30%, 30%, and 40% of the company, the profits will be allocated to each of these members accordingly. But you can also specify an alternate method for profit allocation of your LLC.

Want to learn more about LLCs? Check out the detailed infographic below.

The Essentials Facts of LLCs You Need to Know as a Small Business Owner

Image Courtesy: GovDocFiling

Get more essential LLC facts here.

Author bio:

Brett Shapiro - Guest author on LLC

Born with an entrepreneurial spirit, Brett Shapiro is a born entrepreneur. From selling flowers to starting his own auto detailing and medical supply distribution businesses, he has done a lot. Brett made simple yet unavoidable mistakes while forming his business entities due to the lack of experience. He found his real calling and is now utilizing his experiences and expertise to help others start, build, and grow their businesses the right way with GovDocFiling. Connect with Brett on LinkedIn.

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