Limited Liability Companies For Dummies (For Dummies (Business & Personal Finance))

Title Page
Copyright Page
Table of Contents
Introduction
About This Book
Foolish Assumptions
Icons Used in This Book
Beyond the Book
Where to Go from Here
Part 1 The ABCs of LLCs
Chapter 1 What Is an LLC, Really?
Understanding How LLCs Work
Owners: You gotta have ’em
Contributions: Where the money comes from
Allocations and distributions: Getting what you’re due
Management: Some folks are just better at it
Creating Your Own LLC: Your First Step Toward Success
Educating yourself
Divvying up the ownership
Deciding who manages
Choosing your registered agent
Bringing your LLC into existence
Operating Your LLC
Creating your operating agreement
Keeping books and records
Paying taxes
Chapter 2 LLCs: Handier Than Duct Tape!
Understanding Why LLCs Are Awesome
Protecting your personal assets
Taking charge of charging order protection
How charging orders work
Economic rights versus other rights
Enjoying the flexibility of management and ownership rules
No ownership restrictions
No management restrictions
Choosing your own tax status
Making your selection
Distributing profits at your whim
Taking a Look at a Few Wrinkles
Membership can be a bit tricky
Rules governing LLCs vary among states
Discovering the LLC’s Many Variations
The Professional LLC
Simply wearing a suit doesn’t make you a professional
Different liability protection
Restrictions on ownership
Restrictions on business activities
Forming a professional LLC
The Series LLC
Segregating your assets in a Series LLC
When a Series LLC might work for you
Forming a Series LLC
Maintaining a Series LLC
Series LLC Taxation
The family LLC
The Benefit LLC
The single-member LLC
Chapter 3 Determining Whether an LLC Is Right for You
Knowing Your Options: Other Business Structures
Going it alone: Sole proprietorships
Being a sole proprietorship
Shouldering full liability: The buck stops with you
Exploring some more disadvantages
Losing LLC benefits with disregarded entity taxation
Adding a partner: General partnerships
Doubling the trouble by doubling the partners
Finding out other disadvantages
Filing taxes with partnership taxation
Throwing in a little legal protection: Limited partnerships
Meeting the black sheep of the partnership family: LLPs and LLLPs
Limited liability partnership (LLP)
Limited liability limited partnership (LLLP)
Separating yourself from your business: Corporations
Creating a legal “person”
Dealing with the blow of double taxation
Easing the tax burden: S corporations
Obtaining pass-through taxation, corporation style
Complicating matters with IRS restrictions
Getting Personal: Using an LLC to Achieve Your Specific Goals
You’re running a small business
Relying on insurance — to a point
Taking your business seriously so that others will too
Combining all the perks in one entity: LLCs
You want to work for yourself
You’re looking to raise venture capital
Forming your business as a corporation to attract investors
Knowing when an LLC will work
You want to maximize your real estate investments
Knowing when corps can kill
Protecting real estate with LLCs
You’re looking to keep things in the family
You need to protect what you’ve earned
You’re enrolling others in a project
Part 2 Your First Steps: Forming Your LLC
Chapter 4 Making a Few Key Decisions
Stepping into the Driver’s Seat: Making Essential Decisions Before Forming Your LLC
Choosing the initial members
Deciding how you want your company to be managed
When the members manage
When separate managers manage
Naming Your LLC
Following naming law
Determining the Availability of a Name
Checking names in your state
Conducting a trademark search
Reserving your name in your state
Getting the name you want with a DBA
Getting a trademark for your name
Knowing what constitutes a good trademark
Completing Your Identity with a Logo
Registering your trademark
Changing Your Name
Choosing the Best State for Your LLC
Your State or Not Your State; That Is the Question
When “easy” wins out
When you are operating in multiple states. . .
When you are stuck with pass-through taxation
Looking for LLCs Out of State
Exploring Tax and Privacy Havens
Wyoming: The birthplace of LLCs
Delaware: The heavy hitter with the chancery court
South Dakota: Serious About Attracting Local Business
Nevada: Still Worth a Mention
Other Up-and-Coming States
A Few Caveats. . .
Working with a State-Required Registered Agent
Why you need a registered agent
What your agent should do for you
How to find an agent
Evaluating agents
Chapter 5 Creating and Filing Your Articles of Organization
Preparing Your Articles
Meeting your state’s requirements
Provisions that your articles must have
The antiquated duration provision
Extra provisions you may want to include
Provisions for professional LLCs
Putting it all together
Choosing who signs
Filing Your Articles
Dotting your i’s and crossing your t’s
Sending it off
Dealing with a rejected filing
Considering Formation Companies
Chapter 6 Converting Your Current Business into an LLC
Considering Conversion to an LLC
Navigating the Tax Implications
Converting from a sole proprietorship
Converting from a general or limited partnership
The big nontaxable event
The usual partnership tax trap
Converting from a corporation
Understanding the tax implications
Finding Ways to Ease the (Tax) Burden
Converting smoothly with a merger
Keeping the corporation
Executing the Conversion
Introducing the statutory conversion and statutory merger
Knowing what your state requires
Documenting approval for the conversion
Filing the conversion
If you’re currently operating as a sole proprietor or general partner
Tying Up Loose Ends After the Conversion
Transferring your assets
Part 3 Structuring Your LLC to Work For You
Chapter 7 Tell Uncle Sam How It Is! Choosing How You Want to Be Taxed
Getting to Know the Tax Types
Partnership taxation
Understanding allocations and distributions
Getting creative with flexible allocations and distributions
Deducting LLC losses from your other income
Avoiding self-employment taxes
Disregarded entity taxation
Corporation taxation
Knowing when to choose corporation taxation
Seeing how corporation taxation can be a terrible idea
S corporation taxation
Reducing your taxes
Dealing with the restrictions
Notifying the IRS of Your Election
Applying for your tax identification number
Elect Corporate Tax Status with Form 8832
Chapter 8 Make It Official! Getting Started on Your Operating Agreement
What Is an Operating Agreement?
What the operating agreement governs
Creating a clear-cut ownership structure
Assigning manager titles and duties
Why you need an operating agreement
Establishing Your Framework
Achieving A+ form and structure
Building your outline
Drafting Basic Provisions
Laying out organizational matters
Formation and Qualification
Name
Term
Purpose of the Company
Giving specifics on company records and reporting
Books and Records
Financial Records and Reporting
Getting the boilerplate provisions out of the way
Liability of Members
Indemnification of Members and Managers
Dispute resolution
Addressing the other stuff
Chapter 9 Structuring Your Partnership
Understanding the Terminology: Members, Interests, and Certificates
Locating and Recruiting Key Partners
Finding the yin to your yang
Easy, Tiger! Don’t let excitement cloud your judgment
Getting the good ones on board
Issuing the Membership
Naming the initial members and their contributions
Understanding some complexities of member contributions
Determining profit and loss distributions
Allocations of profits and losses
Distributions
Establishing membership classes
Deciding on how the members decide
Voting requirements
Voting
Making Folks Earn Their Share: Membership Vesting
Deciding on a fair vesting schedule
Understanding membership cliffs
Avoiding common tax pitfalls
Setting Up a Single-Member LLC
Keeping your SLLC’s liability protection
Creating an operating agreement for an SLLC
Setting Up Rules for Managers
Outlining the basics
Electing the managers
Delegation of powers
Compensation
Chapter 10 Using Your LLC to Attract Investors
Structuring Your LLC to Attract Investors
Appeasing the SEC with an LLC
Seeing how the laws apply to you
Exploring securities registration exemptions
Rule 504 exemption
Rule 505 exemption
Rule 506 exemption
Intrastate exemption
Regulation A exemption
Regulation Crowdfunding
Flying through State Securities Laws (Blue Sky Laws)
Chapter 11 Membership Moves: Mastering LLC Transfers
Investigating Intricacies of LLC Membership Interests
Determining the value of the membership interest
Transferring membership
Using transfer restrictions to your advantage
Preparing Now For an Easy Transition Later
Parting on peaceful terms
Removing a member or dealing with divorce
Dealing with the death of a member
Creating individual buy-sell agreements
Executing the Transition
Making room for new members
Giving old and new members their fair share
Wrapping Up the Operating Agreement
Signing and Ratifying
Sharing the copies and storing the original
Amending the operating agreement
Part 4 Running Your Brand-New LLC
Chapter 12 Maintaining Your Records (and Sanity)
Filing Your Initial Report
Getting to know your state requirements
Keeping your company current
Paying to Play: Business Licenses
Acquiring state, city, and possibly county business licenses
Applying for a sales and use tax permit
Following special licensing requirements
State-issued licenses
Locally issued permits
Federally issued licenses
Meeting Other Pertinent Requirements
Federal tax identification number
Workers’ compensation insurance
(Record) Keeping Your Liability Protection
Documenting your decisions with resolutions
Creating a company kit
Creating and maintaining a membership roll
Tracking tax filings and financial information
Chapter 13 Making Cents of Taxes
Reviewing the Tax Types
Disregarded entity taxation
Partnership taxation
Corporation taxation
S corporation taxation
Filing Your Federal Returns
Dishing it out with “disregarded entity” status
Ponying-up with partnership taxation
Preparing Form 1065
Distributing K-1s to the members
Paying the actual taxes
Coughing up cash with corporation tax status
Shelling it out with s-corporation tax status
Avoiding LLC Tax Traps
Transferring assets into your LLC
Dealing with phantom income
Minimizing self-employment taxes
Becoming a silent partner
Choosing to be taxed as an S corporation
Chapter 14 Expanding Your Empire: Going National!
Registering Your LLC in Multiple States
Defining “doing business”
Foreign filing to do business in multiple states
Maintaining Your Multi-State LLC
Working with your Registered Agent to track your filings
Submitting initial reports
Obtaining business licenses
Paying taxes
Withdrawing from a state
Changing your home state
Chapter 15 Dissolutions: Every Beginning Has an End
Getting Clear on the Context
It’s Melting! Examining the Reasons Your LLC May Dissolve
Voluntary dissolutions: Even the mighty fall
Administrative dissolution: The state giveth and the state taketh away
Judicial dissolutions: When the gavel strikes
Action by the attorney general
Action by one or more members
Action by an unsatisfied creditor
Tax terminations: ’Cause the IRS says so
Fictional dissolution: A bureaucratic hassle
Considering the Future Before Calling It Quits
Keeping your LLC on life support
All in favor? Taking the vote
Planning for the future
Undergoing the Dissolution Process
Settling your debts: Paying creditors
Dealing with known claims
Accepting or rejecting claims
Dealing with unknown claims
Giving each their due: Paying members
Wrapping up the government affairs
Making it official: Filing the dissolution
Dealing with the tax consequences
Following the dissolution checklist
Part 5 LLCs on Steroids: Advanced Strategies
Chapter 16 Using LLCs to Cover Your Ass(ets)
Knowing the Dangers: What Can Happen without LLC Protection
Lawyers and creditors come calling
The IRS stakes a claim
Liens are lurking
Getting the Best Asset Protection with LLCs
Setting up a Fort Knox for your personal assets
Taking charge of charging order protection
Seeing how corporations leave you vulnerable
Remembering that even charging order protection comes with rules
You must be a true partnership
Membership can’t be freely transferrable
Your LLC must be manager-managed
Your records must be in order
Exploring Strategies for Increased Security
Electing a nominee to protect yourself with privacy
Setting up multiple LLCs: The more, the merrier!
Following the dual-entity strategy
An example of how dual entities work
The tax advantages
Chapter 17 Protecting Real Estate with LLCs
Comparing LLCs to Other Possible Real Estate Entities
Holding real estate in corporations: a tax nightmare
When an S Corporation might work
Falling short with land trusts
Understanding trust protection
Assessing the pluses and minuses of land trusts
Looking at LLC Property Logistics
Deciding which state to form in
Getting lenders to loan to an LLC
Transferring the title
Part 6 The Part of Tens
Chapter 18 Ten Good Reasons to Form an LLC
To Customize Your Small Business
To Protect Real Estate Assets
To Shield Intellectual Property
To Raise Seed Capital for Your Business
To Plan Your Estate
To Do a Short-Term Project
To Segregate Assets
To Minimize Your Tax Burden
To Change the Profit Distributions
To Protect Your Personal Assets
Chapter 19 Ten Ways to Keep Your Liability Protection Intact
File the LLC Properly
Find a Partner
Create an Operating Agreement
Capitalize the Company
File Your Annual Reports
Hold Member Meetings Regularly
Obtain Your Licenses and Permits
Avoid Commingling Funds and Assets
Sign Your Documents Correctly
Give Up Some Control
Glossary
Index
EULA