What Is an LLC Review?
When you create a new business, you also create a new legal business entity. You can have LLCs as sole proprietorships or an LLC as multi-member LLCs. You will also need a cofounder agreement if you have an LLC with partners.
Working with a lawyer to review your LLC documentation can ensure your business is legally compliant and protects your best interests.
The primary reason for establishing an LLC is to keep your business separate from your finances. In addition, a separate business entity comes with tax benefits and legal protection if someone ever sues your company.
Here is an article that defines a limited liability company.
Types of LLCs
There are 8 types of LLC structures to know:
- Sole Proprietorship. This type of LLC has one founder and sole owner. It is ideal for independent business owners or a 1099 independent contractor who wants to separate their work from their name.
- Multi-member LLC. If multiple people manage the LLC, they need a multi-member limited liability agreement. This type of LLC is ideal when a company has different types of members, like investors and outside management.
- Domestic and Foreign LLCs. Domestic LLCs do business solely in their jurisdiction; foreign LLCs work in multiple states. For example, suppose you live in California but conduct business in New York. Your LLC is considered foreign in NY. You only have to register as a foreign LLC if you have a physical business site in a state you don’t live in or if you trade full-time in that state.
- Series LLC. A series LLC is one business entity with several smaller LLCs beneath it. Each LLC is its series with its members and assets. Accordingly, each series has its business obligations, and adverse outcomes are less likely to affect other LLCs within the series. A business owner who wants to open multiple branches or separate properties can set up a series LLC to reduce personal liability and protect their other assets.
- L3C Company (Low-profit LLC). A low-profit LLC is a new business entity created for charitable purposes. L3C companies are usually LLCs founded by enterprises to attract philanthropic investors. L3C laws vary by state, and they can currently only be incorporated in Illinois, Kansas, Kentucky, Louisiana, Maine, Michigan, Minnesota, Missouri, North Dakota, Rhode Island, Utah, Vermont, and Wyoming.
- Anonymous LLC. An anonymous LLC allows someone to establish a legal entity without identifying its owners or members. You may establish an anonymous LLC to protect your personal information from public records. Some companies operate anonymous LLCs to prevent their involvement or investment with other companies from becoming known to the public. Anonymous LLCs do not prevent you from paying taxes, and you may have to identify yourself if the LLC is ever sued.
- Restricted LLC. Nevada established the first restricted LLC business entity in 2009 and is currently the only state allowing this type of LLC. Restricted LLCs are for individuals with multiple properties who want to prevent assets from liquidation. You can transfer your restricted LLC assets to family members, but you must wait 10 years. The amount of assets someone can transfer to their family is limited by state.
- PLLC. A PLLC, or a professional limited liability company, allows professionals with state regulatory licenses to form their business entity. Professionals who can form a PLLC include medical professionals and lawyers. California does not permit PLLCs; members must form a limited liability company or corporation if they want to operate a shared business entity.
LLC vs. Partnership
An LLC is its business entity, but multiple people with legal obligations own a partnership. A general partnership places liability on the business owners. Still, an LLC faces legal examination entirely on its own in a lawsuit. While the others are still responsible for using their LLC assets to pay legal fees, their assets remain separate.
LLC vs. Corporation
Shareholders own a corporation, and an LLC is owned by the people who founded it. If you buy an LLC, you assume ownership over that business entity. It has no shareholders who govern its decision-making or influence its business model. LLCs combine limited liability with a pass-through tax structure, meaning that you pay taxes on your own based on your shares in the business. Corporations are their taxable entities.
Here is an article with more information on LLCs vs. corporation laws.
What Types of Lawyers Set Up LLCs?
Corporate lawyers handle LLC formation and can help you create a new business. They can handle everything from drafting a limited liability company agreement to legally naming an LLC and negotiating terms with multiple members.
A corporate lawyer will be your most valuable resource if you are forming a small business for the first time. They can counsel you on all the legal requirements of your company and help you organize all the contracts you need.
If you ever want to raise capital or have classes of stock, a correlate lawyer can also be of service.
Here is an article about hiring a lawyer for an LLC.
Benefits of Having a Lawyer Set Up an LLC
Working with a lawyer provides a number of benefits when starting a new business.
- Less stress. You can avoid all the stress and headaches of trying to form your own business and let a lawyer manage all of the documentation for you.
- Legal guidance. Working with a lawyer to set up your LLC provides legal advice about your business's operating structure. This can help you avoid any confusion regarding taxes and legal liabilities.
- Manage high-level LLCs more easily. If you are a corporation or enterprise forming an LLC, working with a lawyer is the best way to provide maximum legal protection for your business.
- Create legally binding agreements for members. If you form a multi-member LLC with others, you may also want to include a cofounder agreement. Again, having a lawyer on your side can help you establish clear expectations and requirements for members of the LLC.
Here is an article about things to do before forming an LLC.
How Much Does It Cost to Review an LLC?
You will have to pay a lawyer’s hourly rate to review a limited liability corporation agreement. Corporate lawyers charge $300 to $750 an hour for their services. The ContractCounsel marketplace can help you connect with attorneys near you and compare their rates.
Here is an article about limited liability companies with more details on what to include in your business entity.
What is the Best LLC to Get?
Your business's best type of LLC will depend on your company’s structure. For example, a sole proprietorship LLC is sufficient if you are a freelancer or entrepreneur. On the other hand, you may want to establish a multi-member LLC if you have multiple members or co-owners.
Corporations founding LLCs will likely opt for series LLCs or even an anonymous LLC in some cases.
Consulting with a corporate attorney can help you determine the best type of LLC for your business needs.
Here is an article with information on choosing the proper business structure.
Why is an LLC the Best Option?
LLCs are great business structures because they minimize your liability while offering pass-through taxation. In addition, you can receive certain tax benefits as an LLC owner vs. an independent taxpayer.
Furthermore, LLCs grant you legal protection in the event of lawsuits. Rather than being held entirely responsible for any claims brought against your business, the LLC acts as a protective barrier. This ensures assets such as your bank account, car, and home.
Here is an article with more benefits of LLCs.
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