In the United States, there are a few different ways that you can structure your business. One form of a business entity includes a Limited Liability Company, known as an LLC. Setting up your business as an LLC allows you to protect your personal assets if your business happens to be sued. LLCs are able to be owned by one or more people, and these owners are referred to as “members”. An LLC with one owner is known as a single-member LLC.
As long as fraud or criminal behavior does not occur, the owners of an LLC are not personally responsible for the LLC's debts or lawsuits. This is often referred to as personal asset protection. This prevents you from being sued for the debts or liabilities of your business.
Limited liability companies are extremely easy to form and maintain versus a corporation. LLCs are not required to assign formal officer roles, hold annual meetings, or record company minutes and resolutions like corporations are.
There are not many restrictions on how you can structure the ownership and management of an LLC. Unlike a corporation, you may have one member or many members. Additionally, a multi-member LLC can be managed by its members, termed as member-managed. It may also be managed by a manager that is appointed by its members, termed as manager-managed.
This flexibility also comes in when LLCs can elect how they wish to be taxed. This might mean taxed similarly to a corporation, sole proprietor, or partnership.
If your business is formed as an LLC its profits go directly to its owners. This means that you will report your share of the LLC profits on your own individual tax returns. This allows the profits from an LLC to only be taxed once, versus with a corporation that will be taxed twice.
LLCs are taxed with what is known as pass-through taxation while in a C corporation, profits are subject to "double taxation". This means profits are taxed once before being distributed to owners and taxed again when owners report their share of profits on their individual tax returns. This results in an overall loss of profits.
Forming your business as an LLC adds a layer of credibility to your brand. Because an LLC is recognized as more of a formal business than a sole proprietorship or partnership, it allows you to obtain more quality business. When forming an LLC you will be required to add “LLC” to your name, which lets customers and partners know that you are a credible business immediately.
If you form an LLC anonymously then you can keep your personal information private. This is typically done by using a company as a registered agent, in the state of New Mexico.
You can form an LLC in any state. Most often though, popular states to form an LLC would include your home state, Wyoming, New Mexico, Nevada, and Delaware. New Mexico is a popular location to form an LLC due to having low overall fees, no annual filing requirements, and anonymity.
You will need to give your business a unique name that is distinguishable from all registered names in the state of New Mexico. It should also comply with New Mexico naming laws and requirements which include:
Also called a statutory or resident agent, your LLC must have one. Your LLC registered agent will need to accept legal documents and tax notices on behalf of your LLC. You will list your registered agent when you file your LLC's Articles of Organization. Your registered agent must be located in New Mexico if this is the state you choose to form in.
An LLC operating agreement is a legal document that outlines the ownership and member duties of your LLC. This is important because in the event there is a miscommunication between the members of the LLC, this is what you would refer to. This is not legally required, but highly recommended.
To register your New Mexico LLC, you will need to file the Articles of Organization with the Secretary of State. This can be done online and is very simple. These articles are not only required for your business but help you to notify the government that your business exists.
Essentially the articles of organization will help to provide the name of your LLC, choose a registered agent, list the services your LLC will offer, and pay the state filing fee. After you file the Articles of Organization, you should obtain an Employer Identification Number (EIN) if you plan to hire employees and open a business bank account.
The only person who really does not benefit from forming an LLC is a business that continually loses money. This might be a hobby or something that simply does not generate revenue.
If you are looking to protect your personal assets from lawsuits, then starting an LLC may be right for you. It can also reduce the amount of paperwork needed as compared to corporations or other legal entity types. Overall, it can prevent you from being taxed twice, and give you credibility as a business. It is a great option for many businesses and will leave you feeling more protected than you were before.