Summary: LLC stands for Limited Liability Company. An LLC is a legal entity that is separate and distinct from its owners. An LLC protects personal assets (home, car, bank account) in the event of a lawsuit. LLCs are most commonly used for operating businesses (you can have multiple businesses in one LLC) or for investing in real estate (when to form an LLC for real estate).
What is an LLC? - Form an LLC (1/11)
An LLC is a limited liability company, a legal entity, also a business structure that’s created by state law. An LLC can be used to run a business, or it can be used to hold assets such as real estate, vehicles, boats, or aircraft. The owners of an LLC are called members, an LLC can be owned by one person, called a single member LLC, or an LLC can be owned by two or more people, called a multi-member LLC. The LLC is created by the filling LLC information documents with your state and paying the filing fee. Why would you form an LLC? The number one reason is for asset protection. By forming an LLC you create a protective wall between your business and your personal assets. Your personal assets include everything that you own, your home, cars, trucks, bank accounts, investment properties, boats, jewelry et cetera. If your business is sued, creditors can only attack the assets of the LLC to settle those debts and liabilities, your personal assets are safe and secure, they are not considered a part of the business. Again, without forming an LLC your personal assets are at risk if your business is sued. Let’s talk about some language mistakes that people make regarding LLCs. There are two common mistakes that people make when talking about LLCs, first they say, I want to form a limited liability corporation. You cannot form a limited liability corporation. There is no such thing. An LLC is a limited liability company. We also hear people say, I’m going to LLC myself, again this is incorrect, you cannot do that, you can’t LLC yourself, but you can form an LLC. Remember, the LLC is separate and apart from you, it’s not you, you form the LLC then you own and manage that LLC. It’s important to understand the difference in these terms so that you don’t sound like an idiot, and you can speak intelligently about your business. Now, let’s discuss the basics of LLCs vs corporations. A lot of people ask us should they form an LLC or a corporation? Let’s discuss the major differences between the two. LLCs don’t have to elect a board of directors, corporations do. LLCs don’t need to hold board meetings, corporations do. LLCs don’t have to keep a record of all of meetings, corporations do. LLCs aren’t subject to double taxation, and corporations are, and LLCs can distribute profits however they want, but corporations can’t. In short, LLCs are the most popular and most flexible business structure for business owners, entrepreneurs, and real estate investors. LLCs are inexpensively set up, they’ll pay a one-time filing fee to form your LLC, and the set up fee is inexpensive compared to forming other types of business entities like corporations. Losing your personal assets is much more expensive than setting up your LLC, and even if your state has higher filing fees, they are well worth the assurance of knowing that your personal assets are fully protected. LLCs are also low maintenance, once it’s set up there are only a couple of requirements to keeping it active. The first requirement is sending your annual report to the state, and note, not all states have annual report requirements. The second requirement is to file your stake in local taxes. Other than that the only additional work you need to do is file a simple form if your change your address. LLCs are quite easy to maintain. How do you form an LLC? You pick a name for your LLC, your prepare your LLC formation documents, you submit your documents to the state and pay the filing fee, and then you wait for approval. Yes, there are a few more steps but those are basics in getting your LLC started. We go into more details on all of these topics mentioned in the rest of the videos in our series.
An LLC is a Limited Liability Company. It is a legal entity (business structure) that is created by state law.
An LLC can be used to run a business, or it can be used to hold assets (such as real estate, vehicles, boats, or aircraft).
LLC Owners Are Called “Members”
The owners of an LLC are called “members”.
An LLC can be owned by one person (called a Single-Member LLC).
Or an LLC can be owned by two or more people (called a Multi-Member LLC).
The LLC is created by filing LLC Formation Documents with your State and paying the filing fee.
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