A company must be set up legally as a Limited Liability Corporation (LLC). In other words, an existing or upcoming business may be set up as an LLC. Unless structured otherwise, every business is regarded as a sole proprietorship.
In contrast, a sole proprietorship does not distinguish between the owner and the business. The business owner distinguishes themselves and the company as separate entities by structuring it as an LLC.
This means that the corporation’s debts and any monetary damages assessed against it in a lawsuit are not personally liable to its owners. One of its drawbacks is the so-called “double taxation” that comes with corporations. In other words, once business profits are earned, they are first taxed to the corporation.
When shareholders get dividends, these profits are taxable as capital gains income. The benefits of a limited liability company are similar to those of a corporation in that the owners’ assets are protected against creditors and lawsuits brought against the LLC.
Additionally, LLCs are not subject to “entity level” taxation, unlike partnerships. As an LLC, they do not pay taxes, unlike corporations. Members who have made a profit are the only ones who pay taxes. The decision to form an LLC is not without drawbacks. Due to the liability of LLC arrangements, owners may be held liable for their negligence.
What Distinguishes a Limited Liability Company from Other Business Structures?
The structure of LLCs differs from those of other popular corporate structures. Revenue from LLCs is only taxed once, unlike income from corporations. In other words, the LLC is not taxed on the income; only the individual members are. This tax structure also applies to limited partnerships and sole proprietorships. The ownership structure of limited liability businesses is different from that of corporations. Corporations are owned by shareholders, whereas individual owners own LLCs.
Regarding liability, LLCs are distinct from both partnerships and sole proprietorships. A partnership’s partners are personally responsible for any debts the partnership accrues. These debts consist of obligations made by the other partner.
In other words, if a partnership owes a creditor money, the creditor has the right to “come after” the partners’ personal and real property to collect on the debt. In most cases, LLC owners are not held personally responsible for the obligations or debts incurred by the LLC. Because of this reality, LLC owners can operate the company without worrying about losing their assets.
Who Ought to Establish a Limited Liability Company?
People who want to run a small business should think about creating an LLC. Creating an LLC limits liability to the assets owned by the LLC, protecting individual assets. By creating an LLC, small business owners can avoid using their personal assets to cover legal costs. People who want to start a business with the least amount of paperwork and expense should also think about incorporating an LLC. The state must be notified of the creation of an LLC by filing “articles of organization” and a fee.
Usually, this charge is lower than the one needed to incorporate a corporation. Compared to corporation creation, LLC formation often involves less documentation to be filed with the state. Additionally, keeping track of LLC earnings and outlays is not difficult. Separate tax returns need not be filed under an LLC. Members and management instead record their earnings and outlays on personal tax returns.
Additionally, managing an LLC can be fairly easy. An LLC with at least two members may create an operating agreement. The members specify in this agreement how the LLC will be run, how earnings will be distributed, and which members’ votes will be required for which decisions. The operating agreement may also specify the procedure for dissolving or terminating the LLC.
The operating agreement may also specify procedures for resolving disputes amongst LLC members. What happens if an LLC member passes away or becomes incapable of working may be covered by the operating agreement.
What is Protected by the LLC? What Does It Not Guard Against?
Even while the LLC form shields members’ private property from a lawsuit, things change if the case alleges a member of the LLC was negligent.
A member of an LLC may be held personally accountable for negligence if a court finds the member to have acted recklessly. Additionally, an LLC member is personally responsible for deliberate torts. For instance, an LLC member is personally responsible for any battery committed during negotiations with another corporate company.
What Conditions Must an LLC Meet?
The conditions for creating an LLC in Louisiana are relatively lenient toward a startup company. Single-member LLCs are permitted in Louisiana since the business owner does not need to have partners to form an LLC. Louisiana does not mandate that the company be based there or that the owner be a citizen or resident of the state.
But the State continues to enforce additional rules:
- The LLC’s name: The LLC’s intended name must be available and include either LLC, LLC, LC, or Limited Liability Company. The Louisiana Secretary of State website allows users to check whether LLC names are available.
- Selecting a registered agent: An individual designated by a business owner to receive legal documents on the company’s behalf is known as a registered agent. When the business owner does not reside in the state where the business is established, most small businesses employ an outside corporation as a registered agent. There are many possibilities online, and the cost is typically low.
- File required documentation with the Secretary of State: Prepare to submit the aforementioned information and the required filing fee to the Secretary of State.
- EIN: To operate the LLC, an Employer Identification Number is required. In addition to allowing the LLC to open a bank account and recruit staff, it is for tax considerations.
What Documentation is Required to Form an LLC?
The Articles of Organization are the sole documents needed to create an LLC in Louisiana. The Articles of Organization are a brief document that lists the business’s registered agent and asks only the most fundamental questions about it.
It typically contains details like:
- Who administers the LLC;
- When the LLC starts;
- The structure of the organization, which in this case is an LLC;
- The name and signatures of the incorporators;
- The length of the LLC (usually indefinite unless otherwise specified); and
- The tenure of the LLC.
What Perks Does an LLC Get in Louisiana?
The benefit of an LLC in Louisiana is that the owner will not be held personally liable for the company’s actions or obligations. That is, the owner’s personal funds cannot be confiscated if the company commits a mistake or incurs debt.
Compared to a typical corporation, Louisiana offers an advantage to LLCs in terms of taxes. The profits of an LLC are only taxed once, compared to the profits of a typical company, which are taxed twice.
What Drawbacks Do LLCs Face in Louisiana?
A Louisiana LLC must submit an annual report to the state when it is established. To simplify, Louisiana has set up an online system, although filing the report comes with a processing fee.
Where Can You Find the Ideal Attorney?
A Louisiana corporate lawyer can guide you through the LLC formation procedure and assist you in constructing your LLC to your best benefit. Use LegalMatch to find the right lawyer today.
