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A lawyer for LLC formation performs a vital function in safeguarding your assets and organization against any liability that might affect it.

Forming an LLC (Limited Liability Company) is the comprehensive procedure of taking your small business or freelancing idea and transforming it into a lawful business entity. Furthermore, roughly one-quarter of small enterprises and startups are Limited Liability Companies (LLCs), making them one of the most predominant business entities in the United States. Also, this number is not even surprising, given the legal and tax benefits that come with an LLC.

However, despite its prevalence, several legal matters may come into the picture when making a limited liability company. It is why many business owners turn to a lawyer for LLC formation to seek their assistance. An LLC lawyer can help you comprehend if an LLC is the most suitable legal arrangement for your business.

Moreover, LLC attorneys can even assist you in setting up your business and define the financial and administrative structure as you take the company to a new level. Keep reading below to learn more about LLCs and how a lawyer for LLC formation can help.

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Why You Should Hire a Lawyer for LLC Formation

While structuring your company as an LLC has considerable benefits, there is also massive legal documentation you must file to specify one. In addition, every state's regulations controlling LLCs ( Limited Liability Companies) are somewhat different. Therefore, you can run into a problem with the statute, local tax authority, or the IRS if you start an LLC without comprehending your state's prerequisites. It is where a lawyer for LLC formation can assist you in avoiding possible traps.

Here are some ways how an LLC lawyer can help you with:

  • Decide whether your company is qualified to operate as an LLC in your state.
  • Define which state is the best to register an LLC, specifically essential if you do trade in numerous states.
  • Understand state-specific LLC regulations and how to comply with them.
  • Prepare and register your articles of organization, the primary document for an LLC you must file with the state to create your limited liability company.
  • Comprehend whether and why a limited liability company is better for your industry than other company structures, including the tax effects of each format.
  • Prepare and negotiate funding contracts for your LLC with investors.
  • Prepare your LLC operating contract, which forms the backbone of your limited liability company and determines how you will make choices and handle the company. It will cover aspects like how to invite new partners into the company, replace associates, and bind the business to enterprise loans and agreements.
  • Retain meeting minutes, member resolutions, and other essential LLC documentation.
  • Assist you in complying with Securities and Exchange Commission (SEC) prerequisites if you want to raise funds from investors.

In addition, it is also possible to create a limited liability company on your own without an attorney's help. Nevertheless, it is better to consult a lawyer for LLC formation if you are forming a limited liability company for the first time or think you cannot handle the documentation.

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Key Features of an LLC

An LLC, also known as a Limited Liability Company, refers to a statutory framework for freelancing companies and small enterprises that transforms them into registered corporate entities. Furthermore, an LLC is a statutory entity that holds a hybrid format.

It contains characteristics of both a company and a partnership. For instance, when comparing an LLC and a company, the company owners have limited liability, and so do owners in an LLC. Meanwhile, when comparing an LLC and a partnership, an LLC is a pass-through entity for tax compliances like a partnership. It implies that individual associates will get taxed only once as a form of respective earnings on any returns the LLC makes.

Types of LLCs

Forming an LLC can help you keep your private and business assets separated, which results in a much lower portion of paperwork than a conventional company structure and holds the additional adaptability in tailoring your business to your situation. However, it is only possible when you choose the right LLC type. So to help you make the appropriate selection, here are the different types of LLCs you must know.

  • Single-Member LLC or Sole Proprietorship: As the name implies, a single-member LLC holds a sole owner and hence works similarly to a sole proprietorship where the owner personally remains accountable for taxes, company transactions, and debts the business owes. Moreover, if a single-member LLC decides not to become a company, it is categorized as a "disregarded entity" and must pay federal and regional taxes as a sole proprietorship. Additionally, single-member is the most prevalent tax filing class and the most inexpensive LLC formation with significantly less paperwork.
  • Manager-Managed or Member-Managed LLC: When founding an LLC, you must set up your desired structure in the operating agreement. It allows you to select between a manager-managed LLC and a member-managed LLC. Furthermore, the most straightforward arrangement is a member-managed LLC, driven by the business’s owners carrying the power to act on behalf of the corporation. Likewise, when there are passive members of the LLC, such as investors, it is prudent to use a manager-managed Limited Liability Company.
  • General Partnership: A general partnership is a favorable LLC structure for creating a company with many members. It implies that all business owners are accountable for the company's dealings, responsibilities, and taxes. Moreover, each member can also choose when assets get traded, and they manage to pay taxes on their allocation of the business revenue. A Limited Liability Company (LLC) is helpful to a small or medium-sized corporation. The fact that multiple individuals share responsibilities is the same in both limited and general partnerships. Nevertheless, one substantial difference is that a single member manages the entire liability. It also leaves one individual with the least amount of trouble.
  • Domestic and Foreign LLC
    • Domestic LLC: When a limited liability company's formation documentation (Articles of Organization) gets registered in a state, it becomes a domestic LLC. The company's location is in that state (popularly known as a home state).
    • Foreign LLC: If a limited liability company gets registered as a domestic LLC in one state but trades in another (physical existence or monetary nexus), it must register as a foreign LLC in the other state(s).
  • Series LLC: Series LLCs are enterprise entities that have a parent company and other LLCs (“string”) under it with their obligations, liabilities, and ownership (prevalent in some states but not all). In addition, an individual sequence in the series LLC usually gets taxed separately.

Key Terms for an LLC Formation Lawyer

  • Administrative Dissolution: Annulment of a limited liability company by an act of the state division in charge of enterprise entities induced by the LLC's non-compliance with statutory prerequisites.
  • Fiduciary Relationship: A connection in which one party (the fiduciary) must operate in good faith and with expected consideration to the best interests of the other parties in the LLC.
  • Indemnification: Monetary security delivered by a limited liability company to its associates and administrators against expenditures and liabilities incurred by them in suits alleging that they violated their responsibility in their assistance to or on account of the limited liability company.

Final Thoughts on an LLC Formation Lawyer

To sum up, we can say that a lawyer for LLC formation can be immensely valuable in your initial years as a business. They can assist you in getting started and keep your company compliant as you grow, raise funds, or hire employees.

If you are looking to get free pricing proposals from vetted lawyers that are 60% less than typical law firms, you can Click here to get started. By comparing multiple proposals for free, you can save time and stress of finding a quality lawyer for your business needs.


ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.


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