A Limited Liability Company, or LLC, is a versatile business entity with many advantages for small business owners. They can be used as a holding company or for a profit business. There may be one member (owner) who also manages the LLC, or you may have a manager with no ownership interest. They are taxed like sole proprietorships and partnerships, but provide liability protection like corporations. You can also choose to tax the LLC like a corporation if you prefer. I help many clients use LLC’s for a variety of purposes and believe that it is a business entity that entrepreneurs looking to start a new business should consider, or for those looking to convert a sole proprietorship or partnership into an entity that will provide liability protection.
For those not familiar with LLCs, “Form Your Own Limited Liability Company” by Attorney Anthony Mancuso does an excellent job of introducing LLCs in the first few chapters. He answers the top ten questions about LLCs, explains their benefits, and compares LLCs to other forms of business. He also provides some basic LLC legality by explaining the number of members, documents required to establish an LLC, responsibilities for managing the LLC, and the obligations of members and managers.
There is a brief chapter on the tax aspects of forming an LLC. This chapter explains the basics well and gives you the knowledge to discuss the topic further with your tax professional.
The chapter on how to prepare an LLC Organizational Budget did a great job. Usually, there are only a few basic items that need to be included in this article. One piece of advice the author gives is to check your state’s procedures for submitting articles, witch is very good advice. You should check with your country! In fact, many states have filled in blank Articles that you can use. Personally, I usually compile different articles, which are similar to the samples in this book. But people should check with their state’s Secretary of State to see what’s required.
The chapters on preparing an LLC Operating Agreement for an LLC are, in my opinion, the most important chapters of this book. Filing Articles is fairly simple, but the Operating Agreement requires a bit more. The author does a great job pointing out what needs to be in an Operating Agreement and providing a good example to get you started.
There is some additional information that is good to know and that will be helpful to someone operating with an LLC. Things like changing operating agreements, signing documents, filing annual reports, working with tax advisors and attorneys. Appendix A contains some very basic information about each state, but again, you really should check with your state, so the information in the Appendix is not really needed.
The sample form is available in torn form in Appendix B and is also on the included CD. The forms are: IRS Form 8832, LLC Name Reservation Letter, Articles of Association, LLC Article Submission Letter, Operating Agreement for a Member Managed Limited Liability Company, Limited Liability Company Management Operation Agreement, Minutes of Meeting, and Certification of Authority.
Overall, this is a good basic book for someone who wants to learn more about LLCs and how to form them. Again, the most important chapter is the one that helps create an Operating Agreement. The samples on the CD can be used as a starting point for creating your own. I’m a big believer in educating myself about this aspect of your business, and Mancuso’s “Form Your Own Limited Company” is a great place to start if you need education about LLCs. If you think this business entity is right for you, read this book to help you get started.