United States — Business: Limited Company

Why this matters

Forming a limited company in the United States is essential for businesses that want to separate their personal and business assets, protect their owners from liability, and take advantage of tax benefits.

Key facts

• An LLC generally protects members personal assets such as vehicle, house and savings if the LLC faces bankruptcy or lawsuits.
• LLC members are considered self-employed and pay self-employment tax contributions toward Medicare and Social Security; the IRS notes an LLC is a structure created by state statute.
• Corporations offer the strongest personal liability protection but cost more to form, and unlike sole proprietors, partnerships and LLCs they pay income tax on profits.
• Registered agents are required for LLCs, corporations and partnerships, and must be located in the state of registration.

Steps

1. Step 1: Choose a Business Structure — Determine whether forming a limited company (corporation) is the best business structure for your business, considering factors such as liability, taxation, and management structure.
2. Step 2: Choose a State of Incorporation — Select a state in which to incorporate your business, considering factors such as taxation, regulatory requirements, and business climate.
3. Step 3: Prepare and File Articles of Incorporation — Prepare and file articles of incorporation with the relevant state authority, which typically includes providing information about the company's name, address, purpose, and shareholders.
4. Step 4: Obtain Licenses and Permits — Obtain any necessary licenses and permits to operate your business, which may vary depending on the type of business and location.
5. Step 5: Create a Corporate Structure and Bylaws — Establish a corporate structure, including the creation of a board of directors, officers, and shareholders, and develop bylaws that outline the rules and procedures for the company.
6. Step 6: Open a Business Bank Account — Open a business bank account in the name of the company to separate personal and business finances.
7. Step 7: Obtain an EIN — Obtain an Employer Identification Number (EIN) from the IRS, which is required for tax purposes and other business activities.