How to open a company in the USA on the example of LLC

What does the LLC look like inside, what documents and conditions are mandatory for its activities.

LLC or Limited Liability Company is the American analogue of a limited liability company known in the CIS countries, where the property of participants is protected from claims of creditors of the so-called Corporate Veil (corporate veil), the obligations of the Company are not the obligations of its participants.

How to create an LLC

A limited liability company or LLC is a relatively new business structure that first appeared in Wyoming in 1977 and is now recognized by the statutes of each state and the IRS.

The LLC is neither a partnership nor a corporation, but is a special type of business structure that offers an alternative to these two traditional organizations, combining the corporate benefits of limited liability with the benefits of end-to-end taxation, usually associated with partnerships.

Limited liability companies are becoming increasingly popular and it is easy to see why. In addition to combining the best capabilities of partnerships and corporations, LLCs avoid the main shortcomings of both of these business structures. Limited liability companies are much more flexible and require fewer current documents than corporations to support them, while avoiding the personal liability risks that come with the partnership. Some examples of well-known LLCs may surprise you - both Amazon and Chrysler are organized as limited companies.

Ownership of the LLC

LLC owners are called "members". Since most states do not restrict ownership, participants may be individuals, corporations, and other LLCs — domestic or foreign. Typically, LLCs can have an unlimited number of members. Most states also allow so-called "single-user" LLCs with only one owner.

Members in an LLC are similar to partners in a partnership or shareholders of a corporation, depending on how the LLC is managed. A participant will be more like a shareholder if the LLC chooses to manage a manager or several managers, because then those participants who are not managers will not participate in the day-to-day management of the company. If the LLC does not want to use managers, participants will closely resemble partners because they will have a direct opinion in the decision-making process of the company.

Single-vs. Multiple-Member LLC

An LLC with more than one natural or legal person is called an LLC with several members. All states also allow one-sided LLCs - those that have only one owner (member). By default, Single - an LLC member is taxed as an individual enterprise (in other words, the IRS is considered a “neglected person”), and a multi-member LLC is taxed as a partnership by default.

Benefits of Opening an LLC

LLC is a relatively new type of business structure that combines the best features of a corporation with those that belong exclusively to owners or partnerships. An LLC has many advantages that cannot be used together in any other business.

Personal liability protection:

LLC is a division separate from its owners. Being a legally excellent organization, the personal assets of each owner (such as a home, car, or personal bank account) are not available to business creditors. The liability of an LLC participant is usually limited to the amount of money that the person invested in the LLC. Therefore, LLC members are offered the same limited liability protection as corporation shareholders.

Tax advantage:

LLCs allow cross-taxation, and this advantage is one of the main reasons for the popularity of LLCs. End-to-end taxation means that LLC income is taxed only once, mainly considered as income from a partnership, individual entrepreneur or S-Corporation. Although neither partnerships nor sole proprietors provide limited liability protection, S-Corporation is most suitable for an LLC. However, S-Corporation is a much more restrictive business structure that is more difficult to maintain.

Easy translation:

LLCs easily sell property rights to third parties without disrupting the business. For comparison, selling interests in an individual business or general partnership requires much more time and effort. The owner must individually transfer assets, business licenses, bank accounts, permits and other legal documentation. The transfer of ownership to S-Corporations is also burdened with many restrictions.

No ownership restrictions:

LLCs do not have restrictions on the number or type of owners. In comparison, S-Corporations cannot have more than 100 shareholders, and each of them must be a resident or citizen of the United States. None of these restrictions apply to LLC.

Easier to increase capital:

LLCs provide many ways to raise capital. An LLC can accept new members by selling membership rights or even create a new class of members with different characteristics of distribution of votes or distribution of profits.

Greater Confidence:

Being a registered LLC, a business will enjoy legitimacy and greater confidence in working with other companies, banks and potential partners or investors than, for example, an individual entrepreneur. LLC is recognized as a legitimate company, and not as a business person.

Flexible management and ownership structure:

Like general partnerships, LLCs are free to establish any organizational structure agreed upon by the participants. In this way, interest gains can be separated from voting shares. This gives owners maximum flexibility to share or combine the interests of investors in the company and people who actually work on a daily basis.

How to form an LLC ?

Creating an LLC, as well as its support, is quite simple. After you decide to create an LLC, the articles of the Organization must be presented in the condition you have chosen, and the initial fees must be paid. After submitting the Articles of Organization, the owners of the LLC must have an organizational meeting at which the Operating Agreement is adopted, interest certificates, if any, are distributed, and other preliminary issues are discussed. The LLC kit includes all information and documents to facilitate this process.

Newspaper publication: In addition to the simple procedures above, the three states require an announcement that the LLC was formed by publishing in a newspaper or in several newspapers. The states that require publication for the LLC are New York, Arizona and Nebraska.

Federal Tax Identification Number (FEIN): To obtain an LLC account and pay federal taxes, you need a Federal Tax Identification Number, also known as an Employer Identification Number or EIN. EIN for LLC is like a social security number for a person. This is the number that the IRS uses to identify the business, and it should be included in all tax documents that the company will make in its activities.

If you now manage your business as an individual enterprise or partnership and now want to create an LLC, you must receive a new EIN for the new facility. Single Member LLC: The IRS allows a one-way LLC to qualify for tax treatment. However, the taxation of one person LLC at the state level may be different.

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