Question about limited liability companies

[Coyote_Bandit]

Is there any reason why a small business with only one or two principals would not want to adopt this form of business entity?

Limited liability to the owner. No double taxation as with corporations. Fewer operational technicalities as compared to sub S corporations. I don't see the downside.

Anybody here know much about these?

[northernsoul]

1. It's a very useful corporate form for small businesses

If you're thinking about creating an LLC, check in with a lawyer who specializes in business planning. Although not as burdensome as the S-corp formalities, there are some "technicalities" you will need to pay attention to (especially to preserve the liability shield_.

[Coyote_Bandit]

3. Is the liability shield

of the LLC easily pierced for single owner entities?

I'm assuming this might be the case since there really isn't an artifical person created in the same way as with a corporate entity.

[northernsoul]

10. this is NOT legal advice,

but by way providing general information, my understanding is that as long as the solitary owner of an LLC observes the formalities required of LLC and maintains a clear division between when she is acting in her individual capacity and when she is acting as a principal/agent of the LCC, the law will respect the seperation of the owner and the entity. Like I said, talk to a business planning lawyer to get proper legal advice pertinent to your jurisdiction.

[Coyote_Bandit]

11. Of course

it is not legal advice - and not taken as such. Don't worry I will not rely on your comments to my detriment or my benefit. In my experience, a question about an issue that has tax implications - including how to best structure a business - is best addressed by a CPA. Attorneys simply do not receive the same level of business training. Not that I have the slightest need or intention of hiring either to render personal advice....

[Raven]

2. In Massachusetts LLC's and LLP's were very popular but

as I recall, there was a $500 filing fee charged by the Commonwealth each year. Some small businesses may rather go Subchapter S rather than pay that fee.

[Coyote_Bandit]

4. OK

I suppose a $500 annual fee isn't much compared to the double tax effect of a corporation. But I can see how that could be a detriment compared to Sub S corps.

[Sgent]

16. There is no double taxation

as an S corp.

LLC's are more popular because you have more flexibility when deciding how to disburse profits, partnership shares, control of the business, etc. The double taxation benefit is the same for an LLC or an S-Corp.

[OneBlueSky]

5. this might be helpful . . .

from Nolo Press . . .

Business and Human Resources: LLC Basics
http://www.nolo.com/resource.cfm/catID/1745D9A3-D50D-4AAD-BFB3ED609A4EE3F5/111/

[Coyote_Bandit]

7. Thanls n/t

[AngryAmish]

6. Start up costs more

[Coyote_Bandit]

8. How so?

Additional/higher fees?

Or the need for additional documents?

Both?

[AngryAmish]

9. yup

[alcibiades_mystery]

12. As someone who formed hundreds of LLCs and served as

the LLC specialist for one of the big corporate law firms, I'm a bit confused by this suggestion. Getting set up as an LLC in the State of Delaware is not particularly costly. In terms of fees for the Secretary of State's office and a registered agent, they are minimal

Here's one example (We used CT Corp and had, obviously, a standing tab with them):

"Limited Liability Company

If you select a Limited Liability Company, Delaware Corporate Agents, Inc. will prepare and file a Certificate of Formation with the Delaware Secretary of State for the State filing fee of $90 USD, plus Delaware Corporate Agents, Inc. Processing Fee of $150 USD that includes our Registered Agent fee for the remainder of the year (until 3/1) at no additional cost, a total cost of just $240 USD. The annual Delaware LLC Tax is $200 USD, which must be paid to the State of Delaware before June 1 of each year. The Franchise Tax is assessed on all Limited Liability Companies formed by 12/31, but is not billed until March 1. Delaware Corporate Agents, Inc. registered agent fee is $125 USD which will be charged to your credit card beginning in March of next year."

There are all kinds of advantages and disadvantages to different sorts of business entities, but I would take formation costs to be relatively low on that list, especially for LLC's.

[Coyote_Bandit]

13. Could you suggest

a good source to read up on the details of the inner workings of LLCs? Thanks.

[alcibiades_mystery]

14. Here's a basic google search

Advantages:

http://www.llc.com/LLC_Benefits.html

Disadvantages:

http://www.1065accountant.com/llc-disadvantages.htm

I'm not in that line of work anymore, so I don't really have immediate access to all the material I once had, nor do I have all the knowledge I once had. I knew one guy who formed an LLC for a construction company that was seasonal, and when he filed for unemployment during the off season he was denied benefits because he was a company owner. He had to transfer his name off the LLC docs, and that was an additional fee. That was bad. He should have formed an S-Corp.

I would say that for small businesses, you're probably better off with an S-Corp. I am not a lawyer, and you should definitely consult a lawyer on these matters if you're unclear, and especially especially especially if you plan to go into business with a friend or partner.

[BlooInBloo]

15. Wiki is good on this...

http://en.wikipedia.org/wiki/Limited_liability_company#Disadvantages