The Limited Liability Company, or LLC, is a versatile business entity with many advantages for the small business owner. They can be used as holding companies or for profit businesses. There can be one member (owner) who also manages the LLC, or you can have managers without ownership interest. They are taxed like sole proprietorships and partnerships, but provide liability protection like a corporation. You can also elect to have an LLC taxed like a corporation if you desire. I helped many clients use LLCs for various purposes and believe it is a business entity that should be considered by entrepreneurs looking to start a new business, or for those that wish to convert a sole proprietorship or partnership to an entity that will provide liability protection.
For those that are not familiar with LLCs, “Form Your Own Limited Liability Company” by Attorney Anthony Mancuso does a very good job of introducing the LLC in the first couple of chapters. He answers the top ten questions about LLCs, explains the benefits, and compares LLCs to other business forms. He also provides some basic LLC legalities by describing the number of members, paperwork required to set up an LLC, responsibility for managing an LLC, and member and manager liability.
There is a short chapter on the tax aspects of forming an LLC. The chapter does a good job of explaining the basics and provides you with knowledge to discuss the topics further with your tax preparer.
The chapter on how to prepare LLC Articles of Organization does a good job. Usually, there are only a few basic items that need to be included in these Articles. One piece of advice the author gives is to check with your state’s procedures for filing articles, witch is very good advice. You must check with your state! In fact, many states have fill in the blank Articles that you can use. Personally, I usually drafted different articles, that were similar to the samples in this book. But people should check with their state’s Secretary of State to see what is required.
The chapters on preparing LLC Operating Agreements for the LLC are, in my opinion, the most important chapters of the book. Filing Articles is fairly simple, but an Operating Agreement takes a bit more. The author does a good job of pointing out what needs to be in an Operating Agreement and provides a good sample to get you started.
There’s some additional information that is good to know and that will help a person who is operating with an LLC. Things such as changing operating agreements, signing papers, filing annual reports, working with tax advisors and attorneys. Appendix A contains some very basic information regarding each state, but again, you really should check with your state, so the information in the Appendix isn’t needed that much.
The sample forms are located in tear-out form in Appendix B and they are also contained on an included CD. The forms are: IRS Form 8832, LLC Reservation of Name Letter, Articles of Organization, LLC Articles Filing Letter, Operating Agreement for Member-Managed Limited Liability Company, Limited Liability Company Management Operating Agreement, Minutes of Meeting, and a Certification of Authority.
Overall, this is a good basic book for someone who is looking to learn more about LLCs and how to form them. Again, the most important chapters are those that help with creating Operating Agreements. The samples on the CD can be used as the starting point to create your own. I’m a firm believer of educating yourself on aspects of your business, and Mancuso’s “Form Your Own Limited Liability Company” is a great place to start if you need education regarding LLCs. If you think this business entity is right for you, check out this book to help you get started.
