When you are starting a business, choosing the most appropriate legal structure for your needs can be an important step. You may have questions about what a limited liability company (LLC) is as well as how to start an LLC.
A limited liability company (LLC) is a business structure that can have impacts on your business taxes as well as how profits and losses are treated. The owners of the LLC are referred to as members. A member can be an individual, a corporation, or even another LLC. There is no maximum number of members and an LLC can actually have only one member. Businesses such as banks and insurance companies generally cannot be formed as LLCs.
The Internal Revenue Service (IRS) treats an LLC as either a partnership, a corporation, or as part of the owner’s individual tax return. An LLC with at least two members is considered to be a partnership for federal income tax purposes. An LLC with only one member is treated as an “entity disregarded as separate from its owner.” Exceptions can be submitted using Form 8832, for the LLC to be treated as a corporation.
In many states, an LLC must file Articles of Organization and an annual report. While the state of Arizona does require the Articles of Organization when you start an LLC, it does not require an annual report.
One of the most beneficial aspects of starting an LLC is that it gives you protection against personal liability. When you form a business as an LLC, your personal assets such as your home, your vehicle, and your bank accounts, will not be at risk in the case of a lawsuit or bankruptcy.
As a member of an LLC, you will have the profits and losses of the business passed through to your personal income, for tax purposes, so that you can enjoy the benefits of a corporation without the corporate taxation. You, and any other members of the LLC, are considered to be self-employed so you will have to pay self-employment taxes and contribute towards Medicare and Social Security.
If your business is a medium or high risk, and you and other owners have personal assets you want to have protected, you may want to start an LLC. You will also pay a lower tax rate than you would in a corporation.
When you decide to start an LLC, there are some basic steps to take as a new Arizona business. After you’ve determined a name for your business, you will need to verify that it is available for use. Check the Arizona Corporation Commission (ACC) website for name availability. If your entity name is not already in use, you can reserve it for your business through the website. You can also go to the Secretary of State’s website to register your company name.
You can then submit your formation documentation to the ACC online. When starting an LLC, your documentation must include Articles of Organization. Your documentation will be examined and approved by one of the ACC’s staff members. They will review the information for statutory compliance and will then either approve or reject the articles for filing. If the articles are rejected, you will receive instructions on how to resubmit. Once the articles are approved, your LLC is officially formed.
The financial experts at Clear View Business Solutions work with small business owners to help them understand how to operate more efficiently and to be more profitable. We can help you develop your financial analysis, research the best business structure for you, develop loan proposals, and write your business plan, all designed to help your business be more successful. We work closely with you to help you be better prepared to make sound financial decisions and to plan for your success.
The past year, in particular, has been a challenge for many small business owners and solo-preneurs and we are here to guide you with professional business advisory services, tax planning and preparation, accounting, and bookkeeping. Learn more about how we can help you and your business by contacting Clear View Business Solutions to speak to our team about our services. Give us a call at (520) 544-0177.
At Clear View Business Solutions, we know you want your business to prosper without having to worry about whether you are paying more in taxes than you should or whether your business is set up correctly. The problem is it's hard to find a trusted advisor who can translate financial jargon to layman's terms and who can actually help you plan for better results.
We believe it doesn't have to be this way! No business owner should settle for working with a CPA firm that falls short of understanding what you want to achieve and how to help you get there.
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At Clear View Business Solutions, we know you want your business to prosper without having to worry about whether you are paying more in taxes than you should or whether your business is set up correctly. The problem is it's hard to find a trusted advisor who can translate financial jargon to layman's terms and who can actually help you plan for better results.
We believe it doesn't have to be this way! No business owner should settle for working with a CPA firm that falls short of understanding what you want to achieve and how to help you get there. With over 20 years of experience serving hundreds of business owners like you, our team of experts combines financial expertise and proactive communication with our drive to help each client achieve results and have fun along the way.
Here's how we do it:
Discover: We start with a consultation to understand your specific goals, what's holding you back, and what success looks like for you.
Strategize & Optimize: Together, we design a customized strategy that empowers you to progress toward your goals, and we optimize our communication as partners.
Thrive: You enjoy a clear view of your business and your financial prosperity.
Schedule a consultation today, and take the first step toward being able to focus on your core business again without wondering if your numbers are right- or what they mean to your business.
In the meantime, download, "The Business Owner's Essential Guide to Tax Deductions" and make sure you aren't leaving money on the table.
