llc booklet

7/29/2019 LLC Booklet

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· Yo u ca n re st r i ct vo t in g r ig h t s

· Yo u ca n w r i t e o ff ea r l y y ea r l o ss es

· Yo u ca n r ed u c e o r el im i n a t e se lf -e m p l o y m e n t t ax es

· Yo u ca n h ave an u n l i m i te d n um b e r o f m e m b e rs

· Pr ov id e s l i ab i l i ty p r ot ec t io n f o r t h e m e m b e r s

Th eL im i t ed

L iab i l i t yCompanyCompany

The care and concern that I have always received from Laughlin Associates is very much appreciated. Your enthusiasm is very indicative of the attitude of your firm,helpful and willing to exert the maximum effort to ensure the success of your clients.

Thomas Maher, Santee, CA



Whether you are in the process of starting a company or if you have been in business fora number of years, making the decision to form a business entity is an important one.

In choosing the right business entity you should ask yourself a few questions; how easyis the structure to set-up, who controls the structure, what are the levels of liability,what are the tax consequences, where, when and how to get started?

To truly make an educated decision on which entity is right for you we have included abrief description of a corporation, partnership, and S-corporation along with an extensive

explanation of a limited liability company (LLC).

www.laughlinusa.com 1-800-648-0961

U NDERSTANDING Y OUROPTIONS

Question

Type of Ownership

Eligible Owners

Management

Allocations of Ownership

Liability of Owner

Duration

Transfer of Ownership

Tax Rate

Pass Throughof Losses

Fiscal Year

Liabilities and Basis

LLC

Membership interests. Theremay be different classes of membership.

No restrictions.

Managed by all members ordesignated manager(s).

Permitted if the allocationshave substantial economiceffect.

There is limited liability forowner(s) and manager(s).

Dissolves at the time specifiedin the Operating Agreement,or upon the loss of a memberunless other members agreeto continue.

There may be restrictionsunder certain state laws.

There is no tax to the LLC onLLC income. All profits orlosses pass through and aretaxed to the members.

Losses passed through tomembers, subject to certainrestrictions.

Must use tax year of membershaving a majority interest in theLLC, or the tax year of allprincipal members if there is nomajority member.

Increased.

C-Corp

Stock, there may bedifferent classes.

No restrictions.

Managed by director(s) andofficer(s).

None. Dividends must bepaid based upon stockownership.

There is limited liability forshareholders, officers, anddirectors.

Indefinitely.

Shares freely transferred.

Graduated Tax rates from15% up to 39% apply totaxable income. PersonalService Corporations are

taxed at 35%of all income.

Losses not passed through.

May use any fiscal year.Personal Service Corps mustuse a calendar year, subjectto certain exceptions.

Not increased.

S-Corp

One class of stock. Whichmay be voting or non-voting.

75 shareholder limit. Nonon-individual and no nonresident alien shareholde

Directors and officers.

None. Income, gain, andloss pass through to theshareholders based onpercentage of shares own

There is limited liability foshareholders, officers, andirectors.

Indefinitely.

Shares can be transferreonly to eligible S corporatshareholders.

There is no tax except in limited circumstances: (1Recognized built-in gainsand (2). Excess passive

income.

Losses passed through toshareholders, subject tocertain restrictions.

Must use calendar year,subject to certainexceptions.

Not increased.

Tax Info



L IMITED L IABILITY C OMPANIES

The limited liability company (LLC) is one of the newest forms of doing business in the UnitedStates. The LLC combines the limited liability of a corporation with the pass throughtaxation of a partnership.

LLCs are great tools for small operating businesses. While LLCs dont provide many of the

same fringe benefits as a C-corporation the flexibility and the simplicity of ownershipmake it the ideal tool for a small company looking for liability protection.

OWNERSHIP

LLCs are made up of members who act in a similar capacity to shareholders in a corporation.Corporations can even be a member or manager of an LLC. This allows greater flexibilitythan an S-corporation which places restrictions on the number of shareholders and whocan be a shareholder. Similar to a corporation, LLCs are considered a separate anddistinct legal entity from its members.

The members buy interest in the LLC with cash, property or the promise of payment.There can be different designations of members based on active decision makers orpassive investors. If the LLC is managed by its members than it is considered membermanaged. If the LLC chooses to hire an outside manager or designate the position to a

member than the LLC is considered manager managed.

M ANAGING Y OUR LLC

How the LLC is going to be managed usually depends on the long-termoutlook for the company. If there are only a few active members in the LLCthen you might want to have the LLC member managed. If you areoperating multiple ventures out of one company with active and passive

members then you might be better off hiring a professional manager orelecting an active member to be the manager to avoid any unnecessaryconflict when it comes to decisions made by the LLC.

Some people will choose to have a corporation act in the capacity of themanager for the LLC. This allows income to be split between the LLC and

the corporation, usually causing a favorable tax outcome.

T AX T REATMENT

LLCs offer flexibility in the way they are taxed. LLCs can choose to be taxed as a

partnership or as a corporation.

When an LLC doesnt make an election the IRS will automatically tax the entity as apartnership, which means all the profits and losses will pass through to the memberspersonal income tax. If you are switching from a sole proprietorship or a partnership youare already used to receiving pass through income, so there would be little change in the

way you currently file your taxes.





Laughlin is the only company teaching and providing comprehensive programs aboutincorporating for the small business owner.

David Del Matio, Escondido, CA

F LEXIBILITY D ISTRIBUTIONS

Another benefit to having an LLC is the flexibility in distributing profits and losses to themembers. Distributions of the LLC can be based on the total amount of membershipinterest each party has, it can be based on the amount of work they put into thecompany, or a number of other flexible distribution formulas.

Example: If you started a computer programming business with a partner andyou contributed all the capital and your partner was the brains behind theprogramming but didnt have any money, you might decide to allocate a greaterpercentage of the distribution to you for a few years until you receive some of your investment back and then reevaluate the situation.

W HY Y OU W OULD U SE AN LLC

Example: Lets say you want to buy some rental property but, you know howrisky it is to have tenants. So you decide to form an LLC and have the LLC buythe property. This prevents you from being held personally liable if the LLC wereever sued.

Example: A small group of family, friends or business associatesdecide to start a small consultation firm. Instead of forming apartnership which adds risk to everyone involved you decide toform an LLC. This provides limited liability to everyone. In additionsome people are buying ownership with cash while others aregoing to be providing their services. Since you can adjust thedistribution in the operating agreement the people who contributecash are going to get a higher percentage of distributions thanthe people who are committing services.

Example: You already own a corporation but you want to buy

some property personally that the company might be using inthe future. So you form an LLC and have the LLC purchase theproperty. In a few months the corporation decides it needs that property toexpand, so the corporation leases the property from the LLC. This allows you tosell the property in the future without having to pay the additional tax generated

by selling a piece of property in a corporation.

You can convert a sole proprietorship or a partnership to an LLC. In many cases its simply amatter of forming the LLC and transferring assets in exchange for a membership interestwhich is not a taxable event. In some states you must publish the fact that you are changingthe partnership to an LLC.




D ISADVANTAGES OF L IMITEDL IABILITY C OMPANIES

Even with these advantages, however, LLCs have their share of problems. The biggestproblem that they currently face is the fact that they are so new. The first LLC statue inthe US was passed in the state of Wyoming in 1976. Nevada passed one in 1991,California in 1995, and the last state joined the fold in 1997. Because of this, there issimply a lack of case law to determine how LLCs will be treated in certain instances.

In addition, tax treatment is not entirely carved in stone,and the IRS and certain states have from time to time madechanges that could be adverse to people in particularsituations. For instance, in Texas an LLC is taxed as acorporation no matter if the IRS views you as a partnershipor not. In California, an LLC is required to pay an annual$800 franchise tax.

Not all businesses can operate as LLCs, businesses in thebanking, trust and the insurance industry, for example, are

typically prohibited from forming an LLC. Some states have their own restrictions on whocan form an LLC. In California architects, accountants, lawyers, doctors and other licensed

healthcare workers are prohibited from forming an LLC.

DOING I T R IGHT

Not only is it important to pick the right business structure but its even more importantthat you set up your new company right from the beginning. Failure to structure yourbusiness correctly from the start can leave you personally exposed to litigation andpossible tax penalties.

Weve all heard the saying if it sounds to good to be true, it probably is. Well the sameholds true when youre shopping around for a company to assist you in forming a new

corporation or LLC. Many companies only promote their fees; they forget to tell youabout the additional fees that certain states impose. Many times the fees imposed by thestate can be more than the fees you are paying to have the company formed. Signing thestate documents without paying these state fees could result in a felony and your companyoperating under false pretenses.

At Laughlin Associates we have one philosophy; make sure the client does it right fromthe beginning. Not only do all our corporate programs include the state fees but we willassist you in completing all your initial corporate documents. We can either walk you

through the paperwork over the phone or for a small fee we will do it all for you.

So before you take the next step ask yourself one question

If I cant afford to do it right, should I be doing it at all?

Laughlin Associates has been assisting people just like you since 1972. We pride ourselveson complete customer service and a professionally trained staff. With the experiencegained by assisting over 77,000 companies, Laughlin Associates is the company with the

know how to get you started right.



Reliable, great service and a knowledgeable staff. I get answers to eludingquestions and I am kept informed.Dan Thomas, Austin, TX

Invaluable to protecting your assets and conserving your income and savings on taxes.

Mary Pruner, Phoenix, AZ

G ETTING S TARTED

Laughlin Associates has trained consultants ready to help you take the next step. Ourservice doesnt stop once you form your company. We are here to make sure you getyour questions answered and keep your company on the right track.

If you are looking at starting a new business or you want to convert an existing businessto an LLC, then the time to take action is NOW! Stop putting yourself and your assets atrisk by operating your business as a sole proprietorship.

LLC formation includes:

Name Search

Operating Agreement

Articles of Organization

Company Seal

Deluxe LLC Kit

20 Customized membership certificates

Minutes for meeting of members

Assistance with Employer Identification number

Resident Agent Service

Corporate Forms on CD

A copy of the book Incorporate the Road to Riches

5

When you work with Laughlin, you get nothing less than premium service.



1-800-648-0966

775-883-8484

Type of Entity: Corporation Limited Liability Company

Entity Name - (Specify all caps and double check spelling)

First Choice:

Second Choice:

LIMITED LIABILITY COMPANY:

LLC Managed by: Members Managers

First and last name of Members or Managers:

CORPORATION:

Name of first director(s):

Name: Name:

Corporation/LLC Packages:

Nevada Rush $905 (48-hours)

California $595 Other state corporation or LLC $795 Connecticut $905

Method of Payment: MasterCard Visa Discover American Express Check

Card #: Expiration Date: Total Amount:

Name on Card: Signature of Card Holder:

All transactions are final. All that we do is submitted and performed with the understanding that we are not engaged in rendering legal, accounting or other professional service. If legal advice or other expert assistance is requithe service of a professional in that field should be sought. Laughlin Associates, Inc., its employees and agents specifically disclaim any liability, loss or risk, personal or otherwise, that is incurred as a consequence of the use or applicatiof the information in this publication.

E N T I T Y O R D E R

F O R M

Fax order to: 775-883-4874

Attn: Rich Haines

2533 N. Carson St.Carson City, NV 89706www.laughlinusa.com

Name:

Address:

City: State: Zip:

Email:

Phone number: Fax:

Name:

Address:

City: State: Zip:

/

Permanent Contact and Shipping Address: (If different)

Contact Name and Shipping Address for Corporation Kit: (No P.O. Boxes)

/

Make checks payable to Laughlin Associates.

State of formation:

LaughlinAssociatesThe Power of Inc.



Laugh l i n A s s oc ia tes , Inc .2533 N . Ca r s on S t .

Ca rs on Ci t y . NV 89 7061 - 8 0 0 - 6 4 8 - 0 9 6 6

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