Forming an LLC for a New Business

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Congratulations on becoming a new business owner. The next step is to consider setting up your business with a limited liability company (LLC). Doing this offers legal protections similar to a corporation, but allows you to manage your company like a small business.

In fact, forming an LLC is one of the most important actions for a business to take. To help, here’s some basic information on LLCs.

What is an LLC?

An LLC is a limited liability company. LLCs limit the liability of the owners/shareholders from the debts of the business and against lawsuits against the business.

By blending the aspects of corporations, partnerships and sole proprietorships into a simple and flexible business entity, LLCs shield owners and operators from personal liability (similar to a corporation) and have the “pass-through” tax benefits of a partnership.

Additionally, LLCs offer the same personal liability protection as corporations, but do not require the typical formalities that are required when managing a corporation.

Learn about the differences between an LLC and a Corporation (Inc.)

Why create an LLC?

The main reason to form an LLC is to limit personal liability because LLCs have their own existence. Think of them as artificial persons. The LLC owns the business, not the people forming it. Additionally, your LLC can enter into its own contracts and deals, can sue someone and be sued, and are liable for their own debts and obligations.

Forming an LLC is the common sense move for entrepreneurs– especially when you consider the country we live in. Judges award billions of dollars every year in business related lawsuits.

In addition to liability and asset protection, tax advantages and more, incorporating offers tremendous estate planning advantages because it continues to exist even after the death of a shareholder.

Here’s a break down of the advantages of forming an LLC:


In our litigious society, incorporating to protect yourself just makes sense. No other structure gives you and your business the liability protection offered by incorporation. When you incorporate, your personal assets are not at risk for the debts and liability of your business.


It doesn’t take a catastrophic lawsuit to wipe out everything you own. Could you satisfy all your business obligations without tapping into personal reserves or losing personal assets? Incorporating takes this burden off your shoulders knowing that your personal assets cannot be targeted in the event of a business lawsuit.


There are a ton of tax benefits that come with incorporation. By law, LLCs and corporations are entitledto many tax. This is because an LLC can be a pass-through tax entity without the restrictions that are imposed on corporations.


They do not require a board of directors, meetings, quorums, minute keeping, and other management formalities.


An LLC can distribute its income to each member equally, based on his or her capital contributions, or in many other ways.

How do you form an LLC?

The owners, called “members,” file Articles of Organization and set out an Operating Agreement. An LLC is a pass-through type of business because the profits and losses are passed on to the members, depending on their share of membership.

While it is easy and inexpensive to form an LLC, the steps of how to do so tend to vary from state to state. As a result, you should check with your specific state to find out what you need to do. Typically, the steps include:

-Choose a business name that is different from existing LLCs in your state

-File paperwork (Articles of Organization)

-Pay a filing fee (from $100 to $800)

-Create an LLC operating agreement (outlines the responsibilities of each member)

-Appoint a Registered Agent (the person representing the LLC and designated to receive any legal documents relating to a lawsuit)

-Publish a notice of intent to create an LLC (only required in some states)

-Obtain required licenses and permits

Who owns the LLC?

Individuals called “members” own an LLC. These owners have an equity interest in the assets of the business, shown in the business balance sheet as owners’ equity.

How are the profits and losses of an LLC managed?

LLC profits and losses are passed through to individuals.

How are LLCs taxed?

LLCs are taxed based on adjusted gross income of the owners.

In conclusion

The truth of the matter is, every entrepreneur needs to incorporate their business. Not just because it adds credibility, makes it easy to get funding and comes with a ton a tax perks…but because it allows you to operate with peace of mind knowing you and your assets are protected.

While this information can be a great starting point, Inc Authority can answer any additional questions you have. And when you’re ready to form your business, we will set it up for free.  Give us a call today at 866-545-1867 to speak with one of our business experts.


Incorporating is the most powerful thing you can do to legitimize your business. And at, our setup LLC services are 100% free. Always. So, don’t wait. Form your free LLC today and enjoy the protection due to you and your business under the law. Start now for free.