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LLC Frequently Asked Questions (FAQs)
We know you may have unanswered questions about the process of forming a business. LLC.com has compiled this list to help you better understand the process and put your mind at ease. Take a few moments to review the FAQs listed below:
Learn more about starting an LLC:
Q: How will I know if my chosen business name is available in my state?One of the first things LLC.com does for you is verify the availability of your first choice of names. One of our Business Consultants will contact you for another choice if necessary.
Q: Do I need to sign the formation documents prior to submission to the Secretary of State?
Some states require your signature on the formation documents. For those states, we will promptly forward you the paperwork to sign and return to us for processing.
Q: Which state is the best choice to form an LLC?
Most small businesses tend to form their LLC in the state where they will physically conduct business. This tends to lessen the cost of registering to do business in additional states, known as "foreign qualification". Delaware and Nevada are also popular choices.
Q: Are there additional costs to form a business in multiple states?
Choosing to operate your business in multiple states will add costs to your formation, both initially and annually. Additional costs will include the fees charged by the government of each state in which you choose to transact business.
Q: In which states must I file taxes, when I start an LLC?
Businesses are generally required to pay taxes in the states where they transact business. Most states have annual filing requirements, including franchise taxes and licenses or permits that may be required based on your industry. Seek the advice of a tax professional to ensure that you comply with all state rules and regulations.
Q: What are the benefits of choosing an LLC to form my company?
One of the biggest benefits of forming an LLC is pass-through taxation. This means that you can report your share of the company's profit or loss on your individual tax returns. The IRS does not tax your LLC separately. You may also choose your company's tax structure with an LLC and take advantage of the IRS tax treatment that best fits your company.
Q: What is pass-through taxation?
Pass-through taxation means that each member of an LLC reports their share of profit and loss in the company on their individual tax returns, and the IRS does not assess a tax on the LLC itself. This avoids what is commonly called "double taxation" of general corporations, where profits are taxed at the corporate level and then again at the shareholder level.
Q: Should my LLC elect corporate taxation?
In certain scenarios, this election may allow LLC members to save on taxes. With corporate taxation, the first $75,000.00 in income gets taxed at corporate tax rates, which is generally lower than the individual tax rates assessed on LLC members. For specific guidance, seek out the advice of a tax professional who specializes in corporate taxation.
Q: Which entity has more restrictions for ownership, an LLC or S Corp?
Subchapter S corporations are limited to a total of 100 shareholders, whereas there is no limit placed on the number of members in an LLC. Members of an LLC are not required to be U.S. citizens or residents, as they are in an S corporation.
Q: What is a Series LLC?
A Series LLC is a limited liability company with more than one series of members, managers, or LLC interest having separate rights, powers, or duties with respect to specified property or obligations of the LLC. Any series may have a separate business purpose.
Q: Which states allow the formation of a Series LLC?
Only a few states have enacted statuses which permit the formation of a Series LLC:
Delaware, Illinois, Iowa, Nevada, Oklahoma, Tennessee, and Utah
Learn more about keeping your LLC in compliance:
Q: I ordered a compliance kit and reference books online at the same time as my LLC. Will everything arrive at the same time?
Once the state approves your LLC formation, we will return the official documents to you. Any additional purchases will be sent separately.
Q: What is compliance and how does it affect my business?
Compliance can be described as the process by which a company remains in "good standing" with the local and federal government. By complying with all state and federal regulations for your state business type, you will maintain compliance. Compliant business owners are only liable to the extent of their investment in the company. Their personal assets should be protected from a judgment or other legal action against the business.
Q: What constitutes non-compliance?
Failure to meet annual state requirements like paying franchise taxes, filing annual reports, renewal of appropriate permits, or maintaining a Registered Agent may cause the Secretary of State to administratively dissolve the company. Other factors considered during an evaluation may include whether owners have properly maintained business records and refrained from co-mingling business and personal assets.
If you should have any further questions about forming your LLC or remaining compliant in your business, please contact us directly.
Speak with an LLC.com Business Consultant at 1-877-261-9606 (toll-free) or 302-636-5457.
Tips & Tools for Start-ups
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