5 Questions to Ask Before Forming an LLC:
If you are planning on starting your own trucking company, or any company, or are currently running a business as a sole proprietor, you should consider forming an LLC. Especially if you’re concerned with limiting your personal legal liability as much as possible. An LLC can be used for businesses of all sizes. From one-owner operations to businesses with many co-owners.
The decisions you make when forming a limited liability company (LLC) can have long-term impacts on your business. Before filing any official documents, there are five things that you should think about:
What State Should I Form My LLC?
There are many things that contribute to choosing a state to form your LLC in. The most obvious choice is the state where you are physically located and will be doing business. But some new business owners prefer to form their LLCs in states like Delaware because of its favorable tax treatment and more fine-tuned corporate legal system.
Other states, like Florida, offer added incentives because they have user-friendly online services that let you file and access corporate documents and information on the Internet. However, it’s important to remember that if you are doing business in states other than the state your LLC is registered in, you will have to file (and maintain) authorizations to transact business as a foreign LLC in such states.
What Will I Name My Company?
The good news is that you can always change the legal name of your LLC if you need to. Every state has a different process for this, and some are more complicated than others. Be sure to check the LLC statute in your state of formation to make sure your preferred LLC name is available and satisfies all legal requirements.
Do I Have Investors?
Starting a business with your own money will make things less complicated, but can get expensive. This is why most new LLCs have investors. Sometimes the investors will agree that they don’t need their money returned until the LLC is sold or liquidated, but sometimes they want to see an immediate return on their investment.
Who Will Own and Manage the Company?
Ownership of the company is usually based on what capital, talent, or other assets people are bringing to the business. One of the most valued assets of your LLC is the membership interests, therefore you will want to relinquish as little ownership interest in your business as possible. It is standard for investors to be members because they’re putting money into the company and hold the most financial risk. The number of interests given to each member will typically be based on such member’s proportional contribution to the LLC. Once the ownership amounts have been negotiated, each member’s interests should be stated in the operating agreement.
Management of the LLC can take many different forms but will usually fall into one of the following categories:
• You are the sole member, with no investor, and you fully manage the company.
• The LLC has multiple members (possibly including an investor), but all the members agree that one person manages the company.
• The LLC has multiple members (possibly including an investor), all the members agree that one person manages the company, but that person needs their consent before taking certain actions that are outside the ordinary course of business, like borrowing money, selling the company, or declaring bankruptcy.
• The LLC has multiple members (possibly including an investor), and all the members agree to manage the company together by forming a board of managers, which is similar to the board of directors of a corporation.
Do I Have an Accountant or Tax Lawyer?
In order to take advantage of your LLC’s potential pass-through tax treatment, you should hire an accountant or tax attorney to advise your decisions. Your tax advisor can inform you how to get your company’s tax ID number and use it to open a bank account. They also can help you write off business expenses for tax purposes and suggest how you should retain receipts and maintain your internal financial records.
Superior Trucking Payroll Service can take care of all of your LLC’s payroll needs. We recommend ATBS for bookkeeping, and Schrotenboer Tax & Accounting for any accounting services your business would need.
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