. The explanation of LLC encompasses a popular type of business set up. LLC stands for Limited Liability Company and is a very popular choice of incorporation. It is a mix between a partnership and a corporation, with protections in place to separate personal and business liability. Limited Liability Companies (LLCs) are fast becoming the most popular type of entity in USA. As the name suggests, the LLC limits the liability (responsibility) of its individual members for some business-related obligations and debts. LLCs are also preferred for estate planning and real estate holdings. Generally, there are no restrictions on foreign ownership of a company formed in the United States.
The procedure for a foreign citizen to form a company in the United States is the same as for a US resident. It is not necessary to be a US citizen or to have a green card to own a corporation or limited liability company formed in the United States. To receive pass-through profit distributions, a foreign citizen may form a limited liability company. In most states, the only formal legal step normally required to create an LLC is to prepare and file LLC Articles of Organization with your state's LLC filing office. In some states, this organizational document is called a Certificate of Organization or a Certificate of Formation. If you have an idea for a business, we can also assist you in start-up your new business directly in the USA from the ground up. In the USA, you must register your business, which we can do for you. Let us know how we can help.
Choose one of the following packages (or choose the appropriate link on the left-side of the page) that will best serve you:
Further information
Professional Delaware LLC formation services for business considering forming a Limited Liability Company or DE Corporation. Coddan offers limited company formation Delaware, incorporating LLC company Delaware, organize Delaware limited liability company LLC, forming limited company LLC Delaware.
The legal form under which a business operates can greatly impact the owner's tax obligation, liability for business debts, control in business decision making, and financing alternatives. The basic legal forms that are used for operating a business are: sole proprietorship, partnerships, limited liability companies and corporations. Other forms of business organization include limited liability companies and joint ventures. Each form has its own advantages and disadvantages depending upon the nature of the business and the prospective owner's plan of operations.
It is important that you consider each form of business organization carefully to evaluate the most appropriate structure for your business. While it is possible for a business to start out under one organizational form and change to another later, proper planning can prevent difficulties caused by an unsuitable legal structure. We recommend that you seek counsel from an accountant and an attorney early on to determine the form of business organization that best suits your business.
Minutes or Consents Documentation of Organizational Meeting (MS Word)
Federal Tax ID Number Form (PDF)
Deluxe Package
£ 315.00
Annual Maintenance Fee £373
To register in Delaware this package price includes (most popular for overseas residents):
Search name availability for your LLC in Delaware
Includes one-time filing fee in Delaware and our one-time service fee
Preparation and Filing of the Certificate of Formation
State of Delaware formation within 24 hours of receipt of order with payment
A recorded copy of the Certificate of Formation within 5-7 business days of filing
Delaware Resident Agent for 12 months
Registered Address in the State of Delaware for 12 months
Nominee LLC Member (Manager) for 12 months
The following documents will be posted to you (Note: these documents are sent to you through TNT Express Mail Service, and are to be completed upon arrival):
Original Certificate of LLC Formation
20 page Delaware LLC Operating Agreement signed by nominee
Minutes or Consents Documentation of Organizational Meeting signed by nominee
Pre-signed, undated resignation letter from Nominee Member
General Power of Attorney signed by Nominee
An indemnity Letter for General Power of Attorney
A nominee service agreement which provides for the indemnification of the nominees
Federal Tax ID Number Form (PDF)
Forming an LLC: Legal Requirements
LLC subscribers may be residents outside the U.S.A.
A LLC may be organized by one person.
The organizer need not be a natural person, nor a member.
You must appoint a minimum of 1 member.
Members can be corporate bodies or private individuals.
An LLC member can be of any nationality.
The LLC owners are called members.
An LLC can have an unlimited number of members (owners).
While the Delaware Act permits a Delaware LLC to be managed by its members, it does not require members to be managers.
A limited liability company may be either member-managed or manager- managed.
The members direct the management of the LLC unless a manager is named.
Most states require that an LLC have a Registered Agent who maintains a registered office within the state of formation.
All LLCs incorporated in the State of Delaware are required to file an Annual Franchise Tax Report and to pay a franchise tax.
The income of a limited liability company passes through to its members, who report the income on their personal tax returns.
LLCs are allowed to have subsidiaries without restriction.
DELAWARE LIMITED LIABILITY COMPANY FORMATION. PAPERWORK FOR FORMING AN LLC
As you start a new business or expand an existing enterprise, you will benefit from considering your options for the legal structure of your business. It will usually be beneficial to seek advice from legal and financial professionals, in determining the form which will best serve your business and tax planning needs. A limited liability company, or LLC, is a business entity that enjoys many of the advantages of being a corporation, including limited liability, while avoiding many of the more significant burdens imposed on corporations, and while retaining many of the characteristics of unincorporated entities such as partnerships and sole proprietorships. By default, an LLC has pass-through taxation, with members declaring their share of profits as income on their personal tax returns. An LLC may opt to be taxed in the same manner as a C Corporation, in the event that it would benefit from being able to retain income and pay taxes on that income at the corporate tax rate. If you want to become familiar with the description and the contents of Delaware LLC incorporation packages, offered by Coddan and to find above, what kind of service is included in this or that Delaware incorporation package, to get an idea about the price of annual renewal of the service, and about the general legal requirements to the Delaware companies formation, please, select the package you need from the list, situated below the banner. The information in the banner will be renewed according to the package you've chosen.
Coddan provides a comprehensive range of online incorporation services, limited liability company (LLC) formation services, S corporation formation services, and non-profit incorporation services for businesses and organizations nationwide and internationally. We also provide a lot of information to help inform you about incorporation and related processes. Our popular domestic total package includes checking and reserving your preferred corporate name, preparing and filing your certificate of incorporation/formation, promptly forwarding the filed copy of the certificate of incorporation/formation to you, providing the required statutory agent services free for the remainder of the first calendar year. International clients often add a package with a certified copy of certificate with apostille, deluxe corporate kit, and courier delivery services. After establishing your corporation or LLC, we can provide support services, such as registered agent representation. We also offer a wide variety of helpful products and services - including corporate documents and supplies, books and guides, Delaware services, IRS form preparation services, and more. Incorporate in Delaware Online: Free Name Check For Your Delaware LLC or Corporation |
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The explanation of LLC encompasses a popular type of business set up. LLC stands for Limited Liability Company and is a very popular choice of incorporation. It is a mix between a partnership and a corporation, with protections in place to separate personal and business liability. Limited Liability Companies (LLCs) are fast becoming the most popular type of entity in USA. As the name suggests, the LLC limits the liability (responsibility) of its individual members for some business-related obligations and debts. LLCs are also preferred for estate planning and real estate holdings. Don't know which type of Entity to form? Call one of our specialists for a FREE CONSULTATION today! Call 0-207-637-3802 or you can chat with one of our reps live online.
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For clients that prefer the advantages of Nevada, Florida, Colorado, California, Texas, Louisiana, Illinois, New York, Washington, Wyoming, etc., our affiliate offices can provide many of these same services. You May Use This Link to Check Out Our Low Cost Incorporation Prices We Can Incorporate Your Business in Any of the 50 States |
The explanation of LLC encompasses a popular type of business set up. LLC stands for Limited Liability Company and is a very popular choice of incorporation. It is a mix between a partnership and a corporation, with protections in place to separate personal and business liability. Limited Liability Companies (LLCs) are fast becoming the most popular type of entity in USA. As the name suggests, the LLC limits the liability (responsibility) of its individual members for some business-related obligations and debts. LLCs are also preferred for estate planning and real estate holdings.
LLCs came about in 1977 and allows for the company to pay taxes on individual profits, while still staying separate from personal affairs. The basic explanation of LLC and why it is popular is for self employed and small home businesses. However, depending on how large the LLC is, there can be managers set up that are the only ones that pay the self employment tax. States will also vary in how they want the LLC taxes paid, so that is something else that needs to be looked at prior to filing a LLC.
To form a LLC, you must fill out the proper paperwork. This involves completing articles of organization and turning them into the state. There are also various fees and taxes that must be paid, and will be discussed during the state's explanation of LLC.
The explanation of LLC's organization is comparable to that of a standard partnership or even shareholders. Unless the LLC is set up with managers, all the individuals within the company have a say in all decision making. There are a number of ways that the business can be structured, however, where decision making and profit interests can be kept apart. That is something the members of the LLC would decide.
There are three main advantages in the explanation of LLC. Firstly, pass through taxation is the most telling reason for people to choose LLCs. This enables profits and losses to be taxed only one time, and makes it easier to keep track of taxes. The second is that the liability of the company is the money that the person invests in the LLC, therefore helping to keep it separate from personal assets. The last is for a very flexible structure in both the organization and the management, which helps keep the business on track. Compare Prices of Various Forms of CompaniesDelaware Corporations and LLCs Registration Packages & Costs |
Most states require an LLC to file a short annual report form with the same state filing office where your articles of organization were filed - typically the Secretary or Department of State's office, in the state capital.
Annual report forms are printed and supplied by the LLC filing office and are mailed out to LLCs annually. These forms typically require basic biographical information, such as the names and addresses of current LLC members and/or managers and the name and address of the LLC's registered agent and office for service of legal process. In some states, you can leave items blank if there is no change in the information from the previous annual report filing. Your LLC will need to obtain a federal employer identification number (FEIN) using IRS Form SS-4 and to register as an employer in your state. For salaried workers, your LLC must withhold, report and pay: federal and, if applicable, state income taxes, federal employment taxes (unemployment, Social Security and Medicare taxes), and state payroll taxes (state unemployment, disability and workers' compensation insurance). LLC members who receive a share of LLC profits are not legally treated as employees unless they also receive a guaranteed salary or other guaranteed compensation, such as interest payments. If LLC owners simply share in LLC profits without receiving any guaranteed payments, the LLC will still have to file for a federal employer identification number, but it won't have to pay employment and payroll taxes. If you have questions please E-Mail or call us: 033 0808-0089 or +44 (0) 207.935.5171, fax: +44 207.504.3531. We Have Available Delaware Corporations and Limited Liability CompaniesList of Delaware Ready-Made LLCs for Sale |
Please note » The prices payable for the items that you order are clearly set out in the web site. There will be no contract of any kind between you and us unless and until we receive payment from you. We are not able to guarantee that any such filing will be acceptable to Secretary of State, nor are there any contractual obligation upon us to do so. If Secretary of State rejects incorporation or other electronic filing, we will credit your account with a full refund and the contract between us will be made void. Secretary of State does not offer a cancellation facility for the incorporation of companies or the electronic filing of documents. We will be unable to cancel any such submission on your behalf and will not refund any payment you have made. All prices shown at Coddan - Online Company Formation Agent are in Great British pounds. Credit cards are the preferred method of payment; we accept VISA, MasterCard and Delta. We can accept payment in UK Pounds Sterling, US Dollars, Euros, Australian Dollars and Canadian Dollars.
An LLC generally can be viewed as a hybrid entity combining the characteristics and, more importantly, the benefits of a corporation and a partnership. With limited liability for its members, an LLC resembles a corporation. The owners of an LLC, like shareholders of a corporation, are generally not responsible for the debts and obligations of the LLC beyond their contributions to the LLC. Members of an LLC can directly participate in the company's management or can elect managers to manage the business. Property with "debt and excess of basis" may be contributed and the contribution structured to avoid gain recognition. A person who contributes appreciated assets to the LLC in exchange for a membership interest is not required to recognize gain on the exchange. Receipt of an interest in an LLC for a profit interest is generally not taxable (although services for stock would be). Liquidating and non-liquidating distributions of appreciated property from an LLC are generally received without gain. In short, the LLC offers significant tax benefits to its members, which are not available to a stockholder in a C corporation.
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PAPERWORK FOR FORMING AN LLC
Except in Massachusetts, where at least two people are required, ONE person can own an LLC any place in the United States. As a result, it is now routine for a sole proprietor to convert his existing businesses to a one-person LLC, and equally as common for a one-person start-up to organize as an LLC. But, of course, there are also many small businesses with two or more members that form LLCs. Businesses with more than a few members often follow the LLC manager-managed approach. Setting up your own LLC is easy-it should take you relatively little time to turn your idea for an LLC into a legal reality. In most states, one person-called the "LLC organizer" - can prepare and file all of the necessary paperwork on behalf of the other initial members of the LLC.
Generally, there are no restrictions on foreign ownership of a company formed in the United States. The procedure for a foreign citizen to form a company in the United States is the same as for a US resident. It is not necessary to be a US citizen or to have a green card to own a corporation or limited liability company formed in the United States. To receive pass-through profit distributions, a foreign citizen may form a limited liability company. In contrast, all profit distributions (called dividends) made by a C corporation are subject to double taxation. (Under US tax law, a nonresident alien may own shares in a C corporation, but may not own any shares in an S corporation). For this reason, many foreign citizens form a limited liability company (LLC) instead of a C corporation. A foreign citizen may be a corporate officer and/or director, but may not work in the United States or receive a salary or compensation for services provided in the United States unless the foreign citizen has a work permit (either a green card or a special visa) issued by the United States.
LLC ARTICLES OF ORGANIZATION
In most states, the only formal legal step normally required to create an LLC is to prepare and file LLC Articles of Organization with your state's LLC filing office. (In some states, this organizational document is called a "Certificate of Organization" or a "Certificate of Formation.") A few states require an additional step, however: Prior to filing your articles, you must publish your intention to form an LLC in a local newspaper. The LLC filing office is usually the same one that handles your state's corporate filings, typically the Secretary or Department of State's office, located in the state's capital city. More populous states also often have branch offices in other major cities.
Your LLC Articles of Organization needn' be lengthy or complex. In fact, you may be able to prepare your own by filling in the blanks and checking the boxes on a form provided by your state's LLC filing office. Converting a partnership to an LLC may require a different form. Some states require pre-existing partnerships that are converting to an LLC to file a special articles form for their new LLC. This form is often called a certificate of conversion. Call your state's LLC filing office (or go online to the state website) to see if they have a special conversion form.
Note that your LLC articles will be rejected by the LLC filing office if the proposed name of your LLC is already in use by another LLC, corporation or other type of business in your state. The best way to make sure you don't run into this problem is to check with your state LLC filing office, before you settle on a name and prepare your paperwork, to see if your proposed name is available for your use. If it is, in most states you can reserve it for 60 days or more for a small fee. Once you reserve your name, it is guaranteed to be available for your use when you file your LLC articles (assuming you file the articles within the reservation period). Many states allow you to check name availability online, and they often provide a downloadable reservation form you can use to reserve a name that's available.
HERE ARE SOME ISSUES TO ADDRESS WHEN PICKING A NAME FOR YOUR LLC
Your proposed business name shouldn't be similar to another business's name or trademark. While the LLC filing office will tell you if another LLC in your state is already using your proposed name, you're on your own as to the names and trademarks of other businesses in your state and in the rest of the country. To be sure another business in your field isn't already using the name or trademark you want to use, you should learn the basics of trademark law and conduct a trademark search.
The name should do a good job of marketing your goods and services. The name must end with an LLC designator, such as "Limited Liability Company" or "Limited Company," or an abbreviation of these words, such as "LLC" or "Ltd. Liability Co." The name usually can't include special words such as banking, trust, insurance or similar words that refer to financial services businesses.
THE LLC OPERATING AGREEMENT
Even though operating agreements need not be filed with the LLC filing office and are not explicitly required by state law, it is a practical necessity that LLC members should create a written operating agreement to define the basic rights and responsibilities of all LLC members and managers. Specifically, an LLC operating agreement sets out membership rights such as the members' capital (ownership) interests and distributive shares (the profits that will be allocated to the members). An operating agreement should also specify whether any actual distributions of profits must be made to the members (or whether the LLC can retain all of the profits in the business.
How the LLC will be managed and the voting power of all the members (and any managers) is also covered in the operating agreement, as well as housekeeping details like rules for holding meetings and taking votes. Lastly, an operating agreement should contain "buy-sell" provisions (unless the LLC will have a separate buy-sell agreement), which lay down a framework for what happens when a member wants to sell his interest, dies or becomes disabled.
What happens if you don't prepare an operating agreement and you later run into a serious conflict with other members? Your LLC's legal life will be controlled by your state's LLC statutes. This means that state law, not the choices you and your business associates make, will dictate how the dispute is resolved. For example, many states have a default rule that says LLC profits and losses must be divided up among the members equally, regardless of each member's capital contribution. Is this really how you would split up profits in your LLC, even if one of your members invests twice as much as the others? If not, you've got to state a different rule in your operating agreement.
Without an agreement defining the rights and responsibilities of members, you won't have control over the answers to basic questions like these:
When your members are faced with an important management decision, does each get one vote, or do they vote according to their LLC capital interests or profits interests (distributive shares)? How many members make up a quorum (the minimum number of members who must be present before a vote is taken)? Also, if your LLC has managers, does each manager get one vote? And how many managers make up a quorum? What if a member wants to increase her capital interest percentage? Can other members stop her or will their relative capital percentages decrease if they decide not to match her investment? How much-if any-of the allocated profits of the LLC must be distributed to LLC members each year? Can members at least expect their LLC to pay them enough to cover the income taxes they'll owe on each year's allocations of LLC profits? Does your LLC have to hold an annual membership meeting? Who can call special meetings of the membership during the year? What are the procedures for giving notice of a special meeting to the LLC members? If your LLC needs additional operating capital after it gets started, are the owners expected to make additional capital contributions (invest more money in the business)? Can a member leave the LLC any time she wishes? If so, is the LLC, or the LLC members, required to buy back the member's interest? What if they can't agree on a fair price? Is a departing member allowed to sell an interest to an outsider? If so, can the remaining members stop the sale, or not admit the purchaser as a new, voting member?
These kinds of unanswered questions can, and frequently do, come back to haunt small business owners, particularly if they have a falling out and haven't written down the details of their agreement. You can almost guarantee that in times of tension these details will be remembered differently. The best tack is to discuss these and other key issues at the beginning of your venture and record these points in a written operating agreement. That way, you can get on with LLC business without having to worry too much about future changes or disputes.
FILING A FICTITIOUS OR ASSUMED BUSINESS NAME
There are a few additional steps associated with setting up an LLC-the remaining items in this section cover the legal formalities necessary to perfect the organization of your LLC. The first one I'll turn to is selecting an assumed or fictitious business name for your LLC.
Many LLCs will operate under their formal LLC name-the name they put in their Articles of Organization . For example, a computer repair shop files its articles under the name Fix Me LLC and also does business under that name. In that case, the LLC doesn't have to file its business name anywhere. But some LLC owners like to operate their LLC under a name that's different from the formal name of their LLC listed in their Articles of Organization.
Fortunately you'll usually have no problem operating your business under a different name than the one you used to organize your LLC. To do this, most states simply require your LLC to file a "fictitious" or "assumed" business name statement and pay a small fee (in legal slang this name is often called a "DBA"-short for "doing business as"). The purpose of this filing is to allow vendors, creditors and customers who encounter your fictitious name to track down the real owners of your business. You normally file this paperwork with the Secretary of State's office or the local county clerk's office. In some states, both a state and county filing are required.
Some states also require you to publish your intention to use a fictitious name in a local newspaper one or more times. Newspapers with legal notice classified sections will perform the required publications for you for a modest fee and will file an affidavit of publication with the state or local county clerk. Calling a local newspaper is generally the easiest way to discover whether your state requires the publication of a fictitious or assumed name statement and how to satisfy any related state requirements.
ADDITIONAL STEPS FOR PRE-EXISTING BUSINESSES
These extra steps only apply to owners of pre-existing businesses. If your business is a start-up-that is, you are not converting a sole proprietorship or a partnership into an LLC-you can safely skip this section.
If you're converting a pre-existing business to an LLC, you'll need to notify the IRS, your state taxing authority and other governmental agencies that you've changed your business's legal status to an LLC, and you'll need to give them your new LLC name. As part of this process, you will need to transfer I.D. numbers, licenses and permits to your new LLC name, including: your federal Employer Identification Number (FEIN); your state employer identification number; your sales tax permit; your business license; your professional licenses or permits, if applicable, and your fictitious or assumed business name statement (this applies if you'll operate your LLC under a name other than its formal name, as explained just above).
Of course, you'll also want to change your stationery, business cards, brochures, advertisements, signs and other marketing and business miscellany to reflect your new LLC status and name. In addition, you'll want to let your suppliers, your customers, your business associates and your bank know your new business name and LLC status. You can do this simply by sending a letter to each company on your new LLC letterhead stationery, telling them that you converted your business to an LLC.
TERMINATION OF A PRIOR PARTNERSHIP
If you're converting an existing partnership to an LLC, you may need to do a little extra paperwork to end the partnership's legal existence.
General partnerships normally don't file organizational papers with the state to get started, so if you are converting a general partnership to an LLC, you won't need to file a document with the state to terminate your partnership. But in some states you are required to publish a "notice of dissolution of partnership" in a local newspaper. (Failing to do this means that a creditor of the partnership could sue the owners of the new LLC personally for his unpaid debts, since the creditor wasn't aware that the partnership ended.) Any newspaper that handles legal filings should be able to explain your state's rules. Once you publish your notice, the newspaper should send you a copy of the published notice and an affidavit of publication to place in your files. Limited partnerships-which, after all, have to make an initial filing with the state to create their partnership entity-must file a document letting the state know that the partnership no longer exists. But if your state provides a special form to convert a partnership to an LLC (often called a certificate of conversion), your partnership will be automatically terminated when you file this form-there's no need to file anything else.
On the other hand, if your state does not provide a special articles form to convert your partnership to an LLC, you may need to terminate the partnership yourself. To do this, you'll probably file a "certificate of termination," or similarly titled document, with the state agency where you filed your original limited partnership papers. To find out exactly what's required, call your state LLC filing office or browse their website online to get instructions on how to terminate a prior partnership.
IF YOUR PRIOR BUSINESS OWED MONEY
If you are converting a sole proprietorship or a partnership to an LLC, and the prior business has outstanding claims or debts, you and your co-owners will remain personally liable for these debts. Of course, this should never be a legal issue if your new LLC plans to assume and pay these bills as they come due. But as a courtesy, and to make sure all creditors of the prior business have notice of your new business form, you should send a letter to notify each creditor that you're converting your prior business to an LLC, and ask them to put future bills in the name of your LLC. If your prior business has significant disputed debts or claims that your LLC will not automatically pay when it begins doing business, I strongly urge you to check with a business lawyer as to your legal responsibilities and rights as to these disputed amounts, and whether you'll have to take any extra steps when converting your business to an LLC.
Some types of businesses that change their legal form to an LLC are required to comply with what is known as the "bulk sales law." In many states, this law applies when retail, wholesale, manufacturing and restaurant businesses are converted to a new legal form. This law requires the publication of various notices in a local newspaper, plus a waiting period before the conversion takes place, to allow creditors of the prior business to submit claims for the payment of unpaid bills. These requirements are meant to make it more difficult for the owners of a business that owes money to change its business form-usually to one with limited liability protection-without arranging to pay its past debts. However, even if you are converting a business that is subject to the bulk sales law, you may be able to exempt yourself from most of the law's notice requirements and waiting periods by agreeing to assume the debts and liabilities of the prior business.
Get help with your state's bulk sales rules. A local newspaper that publishes legal notices can help you understand and meet your state's bulk sales requirements. Normally the publication requirements are not onerous and the fees small. If you have lots of debts- especially if some are disputed-ask a local small business lawyer how to proceed. Trying to figure out every nuance of these laws yourself simply won't be worth your time.
ANNUAL REPORT FILINGS
Most states require an LLC to file a short annual report form with the same state filing office where your Articles of Organization were filed- typically the Secretary or Department of State's office, in the state capital. Annual report forms are printed and supplied by the LLC filing office and are mailed out to LLCs annually. These forms typically require basic biographical information, such as the names and addresses of current LLC members and/or managers and the name and address of the LLC's registered agent and office for service of legal process. In some states, you can leave items blank if there is no change in the information from the previous annual report filing.
REAL WORLD PROOF OF LLC STATUS
Before deciding to do business with your LLC (enter into a contract, sign a lease, agree to sell or buy property or the like), financial institutions, trade creditors or other businesses you wish to deal with may want to see formal legal paperwork that establishes the existence of your LLC. This is particularly likely if you apply to borrow money, purchase securities or buy or sell real estate. You can normally show these status-seekers a copy of your Articles of Organization to help satisfy them that your LLC has handled all the necessary organizational formalities. But occasionally, you may be required to purchase a certified copy of your LLC Articles of Organization to show others. This should be available for a small fee from your state LLC filing office, and should be officially file-stamped by that office, and may also contain formal language stating that your LLC has met all necessary state formalities to begin doing business in your state. (A few even come with an embossed gold seal and ribbon!)
Once in a while, you'll find some outsiders who are such sticklers for detail that they may insist you prove your legal status is still valid on the date they are dealing with you. After all, they may point out your Articles of Organization only show that you met the state's legal requirements when you originally formed your LLC-not that your legal status is currently valid. Most states will help you satisfy these sticklers for current information by allowing you to obtain, for a small fee, a certificate of good standing that shows your LLC meets all state legal and tax requirements on the date of your status request. This should be plenty to satisfy even the most persnickety business that your LLC is a bona fide legal entity.
MAKE ESTIMATED TAX PAYMENTS
Your LLC's members will all have to make quarterly estimated income tax payments during the year. (Of course, if it looks like your LLC will not earn a profit and won't be allocating profits to members at the end of the year, the members probably won't have to estimate and pay income taxes to the IRS and state tax board during the year.) If you miss making required estimated tax payments, you will be charged penalties and interest. To make quarterly tax payments, each member sends in a payment four times a year along with IRS Form 1040ES. For details, see Publication 505, Tax Withholding and Estimated Tax (available at the IRS's website at www.irs.gov). In some cases, the LLC itself must make quarterly estimated income tax payments. This will be true if your state charges the LLC a separate entity-level fee or tax or if your LLC has elected corporate tax treatment.
FOR LLCS WITH PASS-THROUGH TAX TREATMENT
If you will be the only owner of your LLC, your tax returns will be relatively simple. Your LLC itself will not have to file any forms. You'll report all of your LLC income (or losses) on your yearly IRS 1040 form. You'll also have to fill out Schedule C, Profit or Loss from a Business, on which you'll report your LLC profits or losses, and attach it to your 1040 form.
If yours is a multi-owner LLC, you and your co-owners will also report your income from the LLC on your individual income tax returns, Form 1040. But in this situation, even though the LLC itself doesn't pay any income taxes, it does have to file an informational return, IRS Form 1065, each year (the same tax form used by partnerships). The LLC attaches a Schedule K, which reports the total profits, losses, credits and deductions allocated to the owners. In addition, the LLC must prepare a Schedule K-l for each owner, which reports that owner's share of profits, losses and other items shown on the Schedule Ê form. Each owner in turn attaches a copy of the Schedule K-l to her 1040, and uses the information on the K-l to report LLC profits on her individual 1040 form.
FOR LLCS WITH CORPORATE TAX TREATMENT
If your LLC elects corporate tax treatment (by filing IRS Form 8832), the IRS will treat it as a separate taxable entity. The LLC will have to file a corporate tax return, IRS Form 1120, Corporate Income Tax Return, and estimate and pay its own income taxes, at the appropriate corporate tax rate.
STATE TAXES
Most states follow the federal lead and classify your LLC the same way the IRS does. This normally means that, unless you file IRS Form 8832 to elect LLC corporate tax treatment, your LLC will be treated as a pass-through entity at the state level, thereby avoiding the payment of entity-level (LLC) income taxes. Just as with the IRS, the members themselves will pay state income taxes on LLC profits and salaries (assuming your state has a personal income tax). However, even if your LLC itself won't be subject to state entity-level income taxes, it may have to file a state informational return or submit a copy of its federal tax return to the state business tax office.
SOME STATES CHARGE AN ANNUAL LLC FEE OR TAX
California, Florida and Michigan are among a handful of states that charge an annual entity-level fee (often confusingly called a tax), regardless of the LLC's income tax status. In some of these states, the fee is a flat yearly amount; in others it is graduated, depending on the gross income or net profits of the LLC. Contact your state's Department of Taxation or Franchise Tax Board for details.
If your LLC will have to pay a state franchise tax or state income taxes, you'll have to make estimated tax payments. Like federal income taxes, state franchise or income taxes usually must be prepaid in four installments during the tax year, with the first payment consisting of any minimum amount charged. If you miss making estimated tax payments, you will be charged penalties and interest. In some states, your LLC status can be suspended if you fail to pay these state taxes for a few years.
EMPLOYMENT TAX FILINGS
Your LLC will need to obtain a federal employer identification number (FEIN) using IRS Form SS-4 and to register as an employer in your state. For salaried workers, your LLC must withhold, report and pay: federal and, if applicable, state income taxes; federal employment taxes (unemployment, Social Security and Medicare taxes), and state payroll taxes (state unemployment, disability and workers' compensation insurance).
LLC members who receive a share of LLC profits are not legally treated as employees unless they also receive a guaranteed salary or other guaranteed compensation, such as interest payments. If LLC owners simply share in LLC profits without receiving any guaranteed payments, the LLC will still have to file for a federal employer identification number, but it won't have to pay employment and payroll taxes. Ask your tax advisor if you have questions.
OTHER STATE AND LOCAL TAX FILINGS
State sales tax, use tax and county property tax payments apply to LLCs. Counties and cities also may impose local and regional taxes. Check with your county and city tax offices for current information on reporting and payment requirements.
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