Developing an Limited Liability Company
Benefits of a Limited Liability Company
The benefits of an LLC include personal liability protection, tax flexibility, an easy startup process without the need for compliance paperwork, management flexibility, distribution flexibility, few ownership restrictions, charging orders, and the credibility they can give a business. The advance includes
Limits liability for managers and members
Protects you from personal liability for co-owners or employees
Flexible management - cost-effective approach to dealing with various issues
Flow-through taxation: Profits can be distributed to the members, who are taxed on profits.
Provides privacy protection
The LLC enables a business operating structure, including making critical decisions, dividing profits and losses, and dealing with new or departing owners. We suggest that any person starting a business, or currently operating a business as a sole proprietor, should consider forming an LLC. We highly recommend safeguarding personal legal liability separate from the business.
The Operating Agreement
Underscoring the significant provisions of your LLC operating agreement should have the following considerations;
Member Financial Interest: What percentage of ownership is required by the member, and what are the payment methods. What rights do members have relevant to their respective membership interests?
Corporate Governance: When developing an LLC agreement, the formation includes creating a “board” and providing details on how managers or managing members are selected and who will appoint them. Also, the operating agreement should express the powers of managers or managing members.
Corporate Officer’s Power and Compensation: What are the officers authorized to decide, and how are they appointed? The operating agreement should also state officer compensation and how that compensation is determined.
Non-Compete: Recent court verdicts suggest that without a non-compete clause in the LLC operating agreement, a member may be allowed to compete with the business of the LLC.
Books and Records Audit: The operation should be precise about whether and which member of the LLC can check the LLC’s books and records, such as financial documents and board meeting minutes.
The Departure of Members: If a member disconnects from the LLC or termination is required, describe the resolution process clearly.
Fiduciary Duties: Managers or managing members have a fiduciary duty to the company and other members. In addition, the LLC operating agreement cannot “eliminate the implied contractual covenant of good faith and fair dealing.”
Tax Issues: Will contributing to the LLC trigger income or estate taxes for the contributing member in the state where the LLC does business? Will the passive loss apply to an investment in the LLC? Who will file taxes and when? All the mentioned issues must include direction when developing the operating agreement.
Dissolution: The approach to such circumstances must be disclosed to enable the dissolution of an LLC operating agreement. The operating agreement can go an extra step to state whether members can request an involuntary dissolution from the Court.
The above issues generalize the operating agreement while focusing on other concerns. It is wise to discuss your situation with BAM and get your LLC operating agreement custom tailored. The outcome underlines that members’ intentions are explicitly and correctly documented to form a policy and procedure.
Core Elements of Your LLC
Includes provisions relating to equity structure: Contributions, Capital Accounts, Allocations of Profits, Losses, and Distributions, Voting, and Limitation on liability.
Employee Identification Number (EIN)
The EIN enables the opening of a business bank account and filing of company taxes.
We prepare the necessary paperwork and file it with the Texas Comptroller on your behalf. We expedite to ensure a rapid return of 3 to 8 days.
Business Name Search
We search the state directory to confirm your business name is available, complete the LLC paperwork, and submit it to meet requirements in the state.