5 Important Things to Consider During LLC Creation

Posted by Samantha Miller on Jul 13, 2012 2:26:00 PM

Over the next week, we'll focus on helping you understand the basics of company formation. Before you start your business, it's best to have the business become legally recognized by the state through incorporation or formation. Today, we'll do a quick overview of 5 important things to consider during LLC creation. 



An "LLC" or "Limited Liability Company" is a legal entity created by filing the appropriate certificate with your selected state of formation. This entity has "Limited Liability," which helps to separate your personal assets from your business liabilities. 

Here are 5 Important Things to Consider During LLC Creation: 

  1. LLCs do not issue stock. Stocks are specific to Corporations - a different type of business entity that offers different benefits.
  2. An LLC is a "pass through" tax entity. It is taxed like an "S" Corporation, where the profit or loss generated by the business is reported on the personal income tax return of the owners.
  3. LLCs are typically owned and managed by the members of the LLC. On a related note, LLCs have members and managers, not officers or directors. Officers and directors are specific to Corporations.
  4. LLCs are not required to create or maintain by-laws, but instead use an Operating Agreement. Operating agreements are set up internally within your company, and structure how you handle your business.
  5. LLcs are not required to hold annual meetings. This provides more flexibility and offers a benefit if your members are located in varying distances.

Keep in mind that these are brief points and that there is much more involved when creating an LLC. You can learn more in our Learning Center.

Corporations are another type of business entity that may work best for you. If you'd like a quick overview of the differences between Corporations and LLCs, you can download our free Fact Sheet.

These articles from Inc.com also share some great points about what to consider when creating an LLC:

What have you found helpful when setting up or managing your own LLC?

If you have any questions or suggestions for blog posts, let us know!



Topics: LLC Creation, Tips & Tricks