Proy Law Firm - Finksburg, Carroll County - Proudly serving clients throughout Maryland and Pennsylvania - Business Formation and How to Start a Business or an LLC Company


   
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Proy Law Firm
PO Box 499
Finksburg, Maryland 21048

Telephone: (443) 352-8517
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Main Page >> Practice Areas >> Business Formation  >> Limited Liability Companies (LLCs)

 

Business Formation - Limited Liability Companies (LLCs)

 

Limited Liability Companies (LLCs), also known as "LLC companies" are a very popular business structure, and for good reason.

 

LLCs are becoming more popular for new and existing businesses alike. Unlike corporations (such as S-Corps and C-Corps) and partnerships, limited liability companies allow for more flexible business administration and, in some circumstances, more streamlined taxation.

 

Limited Liability Company Tax Advantages:

(1) Single-member LLCs (limited liability companies owned by one individual) are considered "pass through" entities for Internal Revenue Service purposes and business owners may simply report the income on their 1040 at tax time. In operation, the taxation of a single-member LLC is the same as a sole proprietorship. However, you still retain the liability protection of an LLC.

 

(2) Multi-member LLCs (limited liability companies owned by more than one individual) are considered "partnerships" for Internal Revenue Service purposes and business owners may simply report the income on their Schedule K-1 form at tax time. In operation, the taxation of a multi-member LLC is the same as a partnership. However, you still retain the liability protection of an LLC.

 

Common Limited Liability Company Mistakes:

(1) Limited liability companies cannot protect business owners from professional malpractice, such as with physicians, engineers, attorneys and accountants. In other words, if you are in a certain business, a limited liability offers no more personal liability protection than that of a sole proprietorship. However, limited liability companies can still afford you some liability protection in areas that are not related to malpractice, such as contracts and leases.

 

(2) Many business owners fail to properly file the LLC's personal property tax return, which can result in the forfeiture of the business entity and possible liability exposure to the business owner.

 

(3) Using non-attorney online vendors to create a limited liability company. Most online vendors simply input the text you type into a form that is freely available from the Maryland State Department of Assessments and Taxation to create your limited liability company. While this will meet the bare minimum required to establish an LLC, the business owners are often missing out on extra protections afforded to them under Maryland law.

 

(4) Unnecessarily paying for resident agent fees. Every business entity, including limited liability companies, is required to have a resident agent (Maryland Limited Liability Company Act ยง 4A-210(a)(2)). While you are required to have a resident agent for your limited liability company, you may act as your own resident agent. As long as you are comfortable receiving legal documents on behalf of your limited liability company, you should seriously consider acting as your own resident agent. In addition, acting as your own resident agent does not invalidate any of the personal liability protections afforded to you by your limited liability company.

 

 

The Proy Law Firm can Help you Establish your New Limited Liability Company (LLC):

Contact us as any time if you are thinking about establishing a new limited liability company. It is important to start your new business off with the right type of business entity and the proper documentation in place.

 

 

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