Making Money – How to Start and Setup an LLC

Starting and setting up your own LLC for your new or existing business is easy!  This “how to” article will cover some basics on what an LLC is.  You will also learn how to start and setup an LLC on you own in less than 10 6 minutes!

So, let’s get started…

Do you have a hobby that you think can generate some additional side income?  Are you already running your own business and you’re looking for additional legal protection?  Maybe you’ve got a great idea in your head for starting a business and you’re ready to take it to the next level.  A Limited Liability Company (LLC) could be what you need to get your business started with the protection that you need.

Why Should You Start and Setup an LLC?

There are a couple main reasons why setting up an LLC can be a great idea for you:

• Protection of Assets – the LLC provides member’s limited liability protection of their personal assets (if company gets sued or goes bankrupt).
• Pass-through taxation – income or losses get passed through to member’s personal tax returns.
• Credibility – If you are just getting your business off-the-ground, forming an LLC can go a long way to gain credibility.
• Ease of Operation – LLCs are easier to setup and run than a S corporation of C corporation.

Quick story:

My Mother-In-Law owns a thrift shop, and she runs this as a sole proprietorship.  After being in business a couple of months, a frequenting customer “accidentally tripped” down a single step and twisted her ankle.  Long story short, she obtained the services of a lawyer and is trying to gain compensation for her medical bills and pain/suffering.  Does it sound like we have a potential problem here?!?  This lady has the ability to sue my Mother-In-Law for every cent of her personal assets!  Spending less than 10 6 minutes to start and setup an LLC would protect her from this sort of legal nightmare!

 

What are the Pros/Cons of Starting and Setting Up an LLC vs. a Corporation or Sole Proprietorship?

Check out the following table for a comparison of LLCs to other business structures and decide for yourself.

	Sole Proprietorship	Partnership	LLC	S Corporation	C Corporation
Owners have limited liability for business debts and obligations			X	X	X
Company name protected by state-level registration			X	X	X
Business can exist after owner/member dies			X	X	X
May have unlimited number of owners		X	X		X
Easier to get outside investors			X	X	X
Easy to transfer ownership			X	X	X
May be owned by another business			X		X
Low amount of tax related paperwork required annually	X	X	X
Pass-through Taxation (easier to complete taxes)	X	X	X	X
Can choose to be taxed as Sole Prop., Partnership, S-Corp, or C-Corp			X
Double Taxation					X
Owners can split profit and loss with the business for a lower overall tax rate					X
Must be a US citizen to form				X
May issues shares of stock to gain investors				X	X
Able to initiate IPO				X	X
Required to hold annual shareholder meetings				X	X

Is Starting and Setting Up an LLC Right for You?

I used to own my own corporation, and it was both a major headache and distraction from running the business.  I choose to spend countless hours to personally fill out all the necessary corporation paperwork.  This was all to save money by avoiding the services of a CPA.  For me, forming an LLC got rid of the paperwork headache and allowed me to focus on the business.  It was definitely the way to go!

What I like about LLCs is that they are like a “corporation-lite”.  You get a lot of the same legal protection, but you also get additional ease of operation by not having to fill out several tax forms monthly, quarterly, annually, etc.  Because I am trying to start my business on a small budget, an LLC was the right choice for me to avoid paying for an accountant to keep track of everything.

The potential downside is that you MAY incur higher tax with an LLC versus a corporation.  As your company begins to turn a profit, your LLC can elect to be taxed as a S-Corp or C-Corp to take advantage of this if this is a major concern.  This will help you to reduce taxes without incurring a lot of additional paperwork headache that comes with running a corporation.

 

 Next Steps

So, if you are interested and ready to start and setup an LLC, you can do this on-line in less than 10 6 minutes!

I used LegalZoom.com to create my own LLC (Chamberlain Global, LLC).  It was fast, easy, and inexpensive.  The whole setup process went off without any hitches, and I received my new LLC packet in about three weeks.  I highly recommend using LegalZoom.com as they are fast, professional, and easy!!  Note: these are affiliate links, so if you do decide to go with LegalZoom to start and setup your LLC, then thanks for the referral – it does not cost you any extra and I receive a small referral fee.
In the next post on LLC formation, I’ll create a video that walks you through the entire process of starting and setting up an LLC from scratch to show you just how easy it is.  There are several options when setting up an LLC all the on-line websites will try to sell you that you don’t really need, so CHECK OUT PART-2 HERE!!