What is an LLC?

The Limited Liability Company is a relatively new entity type that was developed towards the end of the 20^th century as an alternative to a corporation. Modeled after a German entity type (GmBH), the US LLC originated in Wyoming in the late 1970s, emerged in Florida a decade later and by the early 1990s existed in all US jurisdictions. Since that time limited liability companies have steadily gained in popularity largely because they combine liability protection previously reserved for corporations with single taxation of partnerships. LLCs also have fewer requirements than corporations making them easier to maintain. LLC's are separate and distinct from its owners who are called "members."  LLC's do not issue shares of stock like C Corporations and S Corporations. If you would like to read about S Corps and C Corps check out our blog here.

Ownership/ Member details about LLC's

There are 2 ways to reflect ownership of an LLC.  It can be reflected as a percentage or by membership units which are similar to shares of stock in a corporation. The number of members of an LLC is unlimited and members can be individuals, partnerships, corporations, trust, nonresident aliens, etc.

Things to know about LLC's

• Limited Liability- Absent any specific personal guarantees, the amount at risk for members is limited to their investment in the LLC. The personal assets of the members are generally beyond the reach of creditors. This protection is for all members of the LLC unlike an LLP where one general partner must remain liable for partnership debts. 
• Tax Benefits- LLC members may also enjoy the same flow-through tax benefits which are applicable to partners of a partnership.
• Easier to maintain- LLC's are not required to hold annual meeting and to record meeting minutes. LLC's are known for their operational ease.
• Heightened Credibility- Forming your company into an LLC can increase the credibility associated with your business.

Incorporating your business can give you and the other owners of your business a number of benefits. For the benefits of incorporating you can look HERE. Incorporating your business can be an easy task with your friends at American Incorporators Ltd. to help you. It takes completing these simple tasks and we’ll be there to help you along the way

1)      To be a legal entity you must register your business name with the Secretary of State. If you have already thought of your name check it HERE to make sure it is available in your state.  If you do not already have a name, that’s okay think of a creative name for your business that will be attractive for customers.

2)      Decide what kind of entity you would like to incorporate. LLC, S Corp, C Corp and what state you would like to incorporate in. 

3)      Call Us- 800-421-2661

4)      Depending on your states regulations we could get your documentation and your business up and running in just a few days. 

If you want to download our "How To Incorporate a Business With American Incorporators Ltd" Guide click HERE

There are 5 Different types of entities than can own a business.

• C Corporation
• S Corporation 
• LLCs & LLPs 
• General Partnerships
• Sole Proprietorships

1. Limit the Liability and Protect the Assets of Owners
2. Increase Tax Savings 
3. Raise Capital 
4. Perpetual Existence
5. Simple Estate and Family Planning

 

  Each week, we’ll be providing you with basic information on forming a corporation or limited liability company in a specific state. Today, we’ll get started with Alabama.

Forming a corporation or a limited liability company in Alabama can take a considerable amount of time longer than other states. If this is where you are conducting, we recommend you for in Alabama, despite the time it may take. 

Before beginning your initial filing document, you may be required to obtain a Certificate of Name Reservation from the State of Alabama. This filing will be sent to the judge of probate, who then forwards the filing to the Alabama Secretary of State.

Alabama requires that you include a corporate name identifier in your company’s name. Corporate identifiers for corporations include “Corporation, Incorporated, Inc., and Corp.” For LLCs, corporate identifiers include “Limited Liability Company or LLC.” Alabama also requires that your business name be distinguishable from any other registered or authorized Alabama business identity.

Alabama does not require that a specific purpose be listed on your formation document for both corporations and limited liability companies.  For corporations, Alabama requires that you have one or more Directors listed on your formation document, but does not require you to list any officers. For a Limited Liability Company’s formation document, Alabama requires that one or more managers or members be listed.

Keep in mind that Alabama may have annual filing requirements for both corporations and LLCs. These filings may be due on a certain date and may cost varying amounts. To be sure that you’re receiving up to date annual requirement information, you can check the Alabama Secretary of State website. You receive further information regarding these filings by calling 800.421.2661.

Alabama Business News is a great site if you’re interested in keeping up with business developments and your potential competition! 

When opening a small business, it’s important to research any business license and permit requirements that may apply to your industry. Not having proper licensure can be extremely detrimental to your business. It can cause unnecessary stress, confusion, and potential fines.

To help you avoid this and better understand the basics of business licenses, we’ve answered these 4 common questions. 

1. Why Do I Need a Business License?

Obtaining proper business licenses and permits ensures that your business is maintaining compliance with federal, state, and local laws. Keeping your business license up to date is just as important as paying your taxes and annual state fees.

When applying for a bank account, you will most likely be asked to present your business license. Your business license can also help you with business financing, and may make things smoother when filing your taxes.  

2. What Are the Different Types of Business Licenses?

Keep in mind that license types and requirements can vary from federal, state, county, and city levels. The following are a few common types of business licenses and permits to help you gain a general understanding of what you may need.

Basic Business License: This is typically issued by the city or county in which you’ll be operating.

Health Department Permits: If you prepare, serve, or sell food products, this will most likely be required,

Sales Tax License: This license is typically required for the sales of products and services.

Zoning Permits: This permit states authority to use a certain area of land for a certain purpose.

Professional & Occupational Permits : These may be required for services that are regulated by the state. These services may include, but are not limited to:

Medical Services                Legal Services

Tax Servoces                    Real Estate Services

Be sure to review your state laws if you are in an industry that may require an occupational license.

Federal Permits: if your business involves any of the following, it is best to contact federal departments for specific requirements.

Alcohol, Tobacco, or Firearms  Ground Transportation

Drug Manufacturing                Broadcasting

This is a sample of industries that may require federal licensure. Please check with federal agencies for your specific requirements. 

3. Are There Penalties for Not Having a Business License?

If you do not obtain required business licenses and permits, you are highly jeopardizing the security of your company. Not having a business license can leave you legally vulnerable, result in high financial penalties, and in some cases may lead to imprisonment. Aside from this, it negatively impacts your credibility as a business owner and will cause long term negative effects for your business. 

4. How Do I Get a Business License?

Since business licenses are handled on many levels, we suggest doing research with your state to find out exactly what you may need. You may find that your local city hall, state’s government websites, or www.sba.gov are great resources.

As you can see, knowing exactly what business licenses and permits you may need can be difficult. American Incorproators Ltd. offers a service that researches, details, and lists all of the licenses and permits you will need. The only thing you would need to do is answer a few quick questions about your business. If you’d like to learn more, visit our Business License section.

Having the proper business licenses and permits is just as important as being incorporated. Do not leave this process out of your business plan. We hope that this eases your business license research process! If you have any questions, feel free to post below or contact one of our Incorporation Specialists by dialing 800.421.2661. 

Setting up payroll for your small business doesn't have to be a daunting task.  You'll find that here are many benefits to establishing a payroll system.  In addition to saving you time, it can keep you from incurring any IRS penalties.  We’ve outlined these seven steps to help you set up your small business payroll system in no time.  

1. Obtain an EIN. You must make sure that you have an Employer Identification Number, or an EIN. This number is used when you report employee information or taxes and other documents to the IRS. If you have not obtained an EIN, you can click here for more information. 
2. Check State & Local ID Requirements. Different state and local government agencies require a business to also get an ID number so they can process local taxes.  Check with your state or local government agency.
3. Fill Out the Proper Forms. Have your new employees fill out W-4 forms (Federal Income Tax Withholding form).  Once your employee completes the form, these forms will allow you to withhold the right amount of taxes from the employee's pay.  You also want to be sure to withhold the right amount of taxes depending on if the employee is an independent contractor or an employee.  Business.gov provides an easy-to-understand distinction between the two.
4. Decide on a Pay Period. Some states predetermine employer pay periods, so be sure to review your local regulations.
5. Maintain Careful Documentation. This includes compensation, paid time off, overtime pay as well as health plan premiums, retirement and any other contributions.
6. Choose a Payroll System. You can choose to run payroll in house or use an outsource service . If you’re considering in-house payroll, you can find software to maintain your payroll. Keep in mind that in-house payroll can be time consuming, and if you do not pay close attention to detail, you may face penalties as a result of small mistakes. Outsourcing your payroll can also save you time. Using an experienced accountant or payroll service provider may save you time and money in the long run. Don’t forget to consult within your network – ask other small business owners how they’ve handled their payroll to gain a better understanding of your options.
7. Preserve Well Kept Records. Make sure you’re aware of proper record keeping techniques.  You must keep W-4s on file for every active employee. After an employee is no longer working for you, you are still required to keep copies of their forms for an additional three years thereafter.  

With a little research and simple organization, you will have your small business payroll set up and running.  Review your options and understand what will work best for you. Don’t forget to network with your peers to gain a better understanding of the best options for people in your industry. Remember to follow all IRS and/or local government instructions carefully; when in doubt, ask a professional accountant for advice. 

When deciding on an entity type for your business, you should review how taxes will be handled. Not all entity types are taxed the same way. In this post, we’ll highlight how Limited Liability Companies are taxed differently than corporations.

One feature that Limited Liability Companies do not share with Corporations is their tax options. Limited Liability Companies have the option to do partnership taxation. This process is only available to partnerships, S Corporations, and Limited Liability Companies, and may also be known as “pass through taxation.”

LLC Pass Through Taxation can be broken down into the following 3 characteristics…

• Pass through taxation creates a situation where the business entity will not be taxed.
• Income passes through the business entity to its members.
• How the LLC will report their annual income will depend on its number of members.

This pass through taxation option is one of the notable characteristics of Limited Liability Companies. As always, it is best to do your research. When reviewing an entity type and its tax options, we usually recommend consulting an accountant in order to better understand your options and how you can achieve the maximum benefit for your business. 

If you'd like more information about Limited Liability Companies and how they can differ from Corporations, you can visit our Entity Comparison Chart. Our free Pass Through Taxation Info Sheet (available below) highlights information about pass through taxation, along with defining the most common characteristics of Limited Liability Companies.

Incorporating is an important step to providing you and your business with more security. Corporations historically started as a means for people to gather their finances for large business endeavors, while benefitting from protection from liability. Without such protection measures, people were less likely to invest in projects, leading to the continuation of corporations.  

This limited liability feature is one of the most prominent features of corporations and limited liability companies. You can protect your personal assets by incorporating or forming a company. When you do so, you are creating a legal entity that is separate from yourself. This means that your personal assets and your business assets will be separate. In the event of a lawsuit or if your business should fail, your personal assets cannot be touched.

As an owner, you are separate from the legal business entity, but you still must be sure to follow all state rules and regulations regarding your corporation or limited liability company.

A few steps to insure that you protect your assets include…

• Creating proper articles of incorporation and bylaws, along with any other set state requirements.
• Acting in accordance to the company’s articles and bylaws.
• Vigilant recordkeeping habits, including attention to detail.
• Maintenance of annual taxes. 

Aside from these basic steps, there are further ways to maximize your liability protection. Here, we’ve noted 3 Key Do’s and Don’ts that will help you protect your assets. 

Once you incorporate your business, you are on the road to protecting your personal assets. You should keep in mind that there are still legal obligations for you to follow in order to achieve maximum liability protection. If you’d like to learn more about incorporation and its benefits, check out our Learning Center. You can also learn more about state specific requirements by visiting our detailed State Database.   

Our “How Incorporating Protects Your Personal Assets” info sheet summarizes asset protection strategy and other benefits of incorporating. It’s available for free download by clicking the button below!