Hey, I'm Lori!
New York, New York
Whether you are just starting your business or have been operating as a sole proprietorship or general partnership, you may be wondering about the benefits of incorporating your business as a limited liability company (LLC). Many business owners assume it will be too costly or time-consuming, but neither is the case. Limited liability companies are legal, but if you're being asked to join one and you're having doubts, it would be good to have a contact that could draw up a California notary form for you.
A limited liability company is simple to form and maintain, particularly for a single member. It offers pass-through tax treatment to avoid double taxation, unless the members choose an alternative tax classification. LLC members enjoy the same personal liability protection for their personal assets as shareholders in a corporation, but are not required to maintain the same formalities such as annual meetings and written corporate minutes. Nevertheless, it pays to have an apostille California to authenticate the veracity of documents pertaining to the LLC. The LLC also offers members greater flexibility than a corporation does in structuring the management of the LLC business. This is discussed in more detail below, but first, a backgrounder on apostille.
An apostille is a type of certification issued by government entities to authenticate various documents. Through the apostille convention, the Hague Conference on private international law drafted a treaty that specifies a "document issued in one of the signatory countries can be certified for legal purposes in all the other signatory states," as per Wikipedia. It's practically like your typical notary public, but it's a type of international certification. Now back to the benefits of LLC.
- Pass-through taxation.
LLCs typically do not pay taxes at the business level. Any business income or loss is "passed-through" to owners and reported on their personal income tax returns. Any tax due is paid at the individual level.
- Heightened credibility
Forming an LLC may help a new business establish credibility with potential customers, employees, vendors and partners because they see you have made a formal commitment to your business.
- Limited compliance requirements
LLCs face fewer state-imposed annual requirements and ongoing formalities than S corporations and C corporations.
- Flexible management structure
LLCs are free to establish any organizational structure agreed upon by the company owners. LLCs can be managed by the owners (members) or by managers, unlike corporations, which have a board of directors who oversee the major business decisions of the company and officers who manage the day-to-day affairs.
- Few restrictions
There are few restrictions on who can be an LLC owner or how many owners an LLC may have (unlike S corporations). In this sense, LLCs are a more open type of enterprise.
The Flexibility Quotient
Flexibility in the management structure is one of the main advantages an LLC offers over the corporate form. Every corporation must have the same structure: shareholders, directors, and officers. Even though every state allows one person to form and manage a corporation, that person must still be designated as a shareholder, a director, and be appointed as the president, treasurer, and secretary of the corporation.
This hierarchical structure required for every corporation is set forth in extensive and detailed statutes in every state. Many of the rights afforded to the various positions in the corporate structure (shareholders, directors, and officers) cannot be varied by the corporation's governing documents. Where variances are permitted, the flexibility allowed in altering the management structure is still far more restrictive that an LLC.