Frequently Asked Questions

Our experts answer all important questions.

Below are some of the frequently asked questions our clients ask us before starting their company with us. If for some reason you can’t find an answer to your questions below, you can always contact us directly by email, phone or live chat support located at the bottom of every page.

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What is a Limited Liability Company (LLC)?

An LLC is a hybrid legal entity, combining the pass-through taxation of the sole proprietorships and general partnerships with the liability protection of corporate structures. The business organization is authorized according to state statute. Establishing an LLC provides business owners with a layer of separation between themselves and the service or product they sell or provide; should the company be sued the owners’ assets are usually protected.

Revenue Ruling 88-76

This 1998 ruling saw the IRS shift from its initial position, that it would tax LLCs as corporations, to the stance that “a ‘member-manager’ of an LLC will be treated as a general partner.” If no one company owner is designated a ‘member-manager’, then all the members would be treated as ‘member-managers’ by default. So long as LLCs have no more than one of these other “corporate” characteristics—continuity of life, free transferability, and centralized management—they would enjoy the same pass-through taxation status as general partnerships.

By 1997, the IRS gave up trying to make these complicated determinations and turned over the reins to individual companies, allowing them to check a box if they wanted to be tax as corporations or partnerships. LLC registrations took off after this decision; LLCs are now a staple organizational structure of American and international companies.

Who can form an LLC?

There are no citizenship or residency restrictions on who can become a member of an LLC, nor does a member have to incorporate in the same state where they registered the LLC. States only require that individuals be of the age of majority, 18 in most cases, to register an LLC.

That means, not only that foreign nationals can become members, but also that corporations and other LLCs can become members of an LLC. In some cases, another corporate entity may be the sole member of an LLC. In that event, they would be treated as a partnership or multi-member LLC for tax purposes.

How are LLCs managed?

LLCs can be either member-managed or manager-managed. A member-managed LLC distinguishes between owners, or managers and members, who may play a more passive role in the day-today operation of the company. Manager-managed LLCs are structured and act like traditional corporations.

What are the advantages of becoming an LLC?

LLCs have a flexible organizational structure to go along with their flexible tax designation. These in include:

Limited Liability Protection

An LLC protects most of the members’ assets, restricting liability to the personal interest each person has invested in the company. The signatory on a business loan, for instance, would still be liable to make the payments on that loan. However, members are not liable to pay any monies awarded because of a lawsuit filed against the LLC.

Pass-Through Taxation

A single-member LLC has the same tax structure as a sole proprietorship, in which business losses and gains are paid through the member’s income tax. This has real advantages for a small-business startup, since members can use early business losses to offset taxes owed on other income.

Few Ownership Restrictions

There are no citizenship or residency restrictions on who can become a member of an LLC, nor does a member have to incorporate in the same state where they registered the LLC. States only require that individuals be of the age of majority, 18 in most cases, to register an LLC.
That means, not only that foreign nationals can become members, but also that corporations and other LLCs can become members of an LLC. In some cases, another corporate entity may be the sole member of an LLC. In that event, they would be treated as a partnership or multi-member LLC for tax purposes.

Minimal Compliance Requirements

LLCs have few state-mandated requirements other than an annual filing requirement with minima accompanying paperwork. All other compliance regulations are subject to the rules determined by the LLC’s operating agreement. LLC can have whatever meetings they wish and can document those meetings however they wish; they are not formally required to hold annual meetings with the board of directors and shareholders.

Flexible Allocation of Profits to Individual Members

The LLC can choose to distribute profits to its individual members based on their ownership percentage. For instance, in a two-member LLC, each member would receive 50 percent of the profits. However, unlike corporations, which must distribute profits that reflect the exact percentage of each shareholder, LLC members can also predetermine a special percentage allocation; if one of the two members contributes more to the company for instance, he/she might receive 70 percent of the profits.

Versatile Tax Designation

LLCs can choose how they are treated as a taxable entity. Although, the default established by the IRS, is that LLCs be taxed as partnerships, an LLC can elect to be taxed as a C or S corporation whenever its members decide to make the change [need to add disclaimer].

How do LLCs differ from other business and corporate structures?

The key difference between LLCs and other business structures is flexibility. As a hybrid, it has taken good features, from both traditional corporate structures and sole proprietorships, and it places few restrictions on how the company is managed, which gives a business freedom to evolve.

Pass-Through Taxation

Single-member LLCs differ from C corporations—but are like sole proprietorships and S corporations—in that taxes are not paid at the business level. Instead, income and loss are reported on the member’s tax return; any taxes due are paid at the individual level.

Limited Liability Protection

LLCs differ from sole proprietorships and general partnerships, in that the treat the company as a separate legal entity, which can be sued directly—this gives LLC members limited liability protection.

Flexible Management

C corporations have a formal top-down structure, where the board of directors oversees major business decisions, and the officers oversee the day-to-day business operations. S corporations have regulations that restrict the class and number of shareholders.

An LLC, on the other hand, can manage its business structure however the members want, and the main rules are noted in an internal document, the operating agreement. Some LLCs are member-managed, which makes them work more like general partnerships, others are manager-managed. Also, unlike S corporations, which are restricted to 100 shareholders, LLC have no such restriction.

What is a Corporation?

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Who can form a Corporation?

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How are Corporations managed?

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Nam magna justo, malesuada id ligula a, suscipit semper nisi. Integer blandit dignissim mauris vitae suscipit. Aliquam vulputate turpis eget nisl dapibus scelerisque. Nulla facilisis dui arcu, at consequat dui tincidunt id. Proin tempus erat sit amet mi tincidunt finibus. Aenean porttitor congue vehicula. Ut laoreet ex eget magna pharetra commodo. In vehicula facilisis pellentesque. Sed sit amet viverra turpis, eu sagittis odio. Suspendisse ex dui, congue ut cursus sed, iaculis id metus. Curabitur rhoncus ante in elementum interdum. Aliquam consectetur urna erat, sed eleifend dolor ornare ut. Duis varius commodo lobortis. Nullam nibh lectus, ullamcorper sit amet massa id, dignissim interdum augue.

What are the advantages of becoming a Corporation?

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What is a Subcharter Corporation (S Corp)?

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Who can form an S Corporation?

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How are S Corporations managed?

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Nam magna justo, malesuada id ligula a, suscipit semper nisi. Integer blandit dignissim mauris vitae suscipit. Aliquam vulputate turpis eget nisl dapibus scelerisque. Nulla facilisis dui arcu, at consequat dui tincidunt id. Proin tempus erat sit amet mi tincidunt finibus. Aenean porttitor congue vehicula. Ut laoreet ex eget magna pharetra commodo. In vehicula facilisis pellentesque. Sed sit amet viverra turpis, eu sagittis odio. Suspendisse ex dui, congue ut cursus sed, iaculis id metus. Curabitur rhoncus ante in elementum interdum. Aliquam consectetur urna erat, sed eleifend dolor ornare ut. Duis varius commodo lobortis. Nullam nibh lectus, ullamcorper sit amet massa id, dignissim interdum augue.

What are the advantages of becoming an S Corporation?

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Nam magna justo, malesuada id ligula a, suscipit semper nisi. Integer blandit dignissim mauris vitae suscipit. Aliquam vulputate turpis eget nisl dapibus scelerisque. Nulla facilisis dui arcu, at consequat dui tincidunt id. Proin tempus erat sit amet mi tincidunt finibus. Aenean porttitor congue vehicula. Ut laoreet ex eget magna pharetra commodo. In vehicula facilisis pellentesque. Sed sit amet viverra turpis, eu sagittis odio. Suspendisse ex dui, congue ut cursus sed, iaculis id metus. Curabitur rhoncus ante in elementum interdum. Aliquam consectetur urna erat, sed eleifend dolor ornare ut. Duis varius commodo lobortis. Nullam nibh lectus, ullamcorper sit amet massa id, dignissim interdum augue.

How do I get started?

Quickly complete our convenient online order form, which collects all of the necessary information, and only takes a few minutes. Please contact us by email or phone, if you have any questions or would like help getting your order processed.

What happens if the company name I want is not available?

We request that you provide up to three name choices when you order. The name is selected based on your priority and availability. If all three names are not available, we will contact you for additional name choices.

What happens if I change any of my information after my order is complete?

Depending on the type of information that is changing. Some information, for example, company’s name, business purpose, number of shares and/or par value (for corporations), must be changed with the state by filing an amendment. The state filing officially updates the information the state has for your registered company.If you have any questions on whether specific information in your state-filed documents would need to be updated by means of an amendment filing, contact our office.

What if there is an error on my state-filed documents?

We are confident in our ability to provide accurate filings. We review each order we receive to identify potential errors. In the unlikely event that an error is made, We’ll respond promptly to remedy any error.We warranty our filing services against defects caused by us for the life of your company. We will absorb any fees/costs necessary to correct the error and will correct the mistake as quickly as possible.

If, on rare occasions, the state makes a mistake in entering your information. If you notice an error, contact us immediately and we will work directly with the state to correct it.