The Limited Liability Company, or LLC, is a versatile business entity with many advantages for a small business owner. They can be used as holding companies or for profit. There may be a member (owner) who also manages the LLC, or it may have managers with no ownership interest. They are taxed like sole proprietorships and partnerships, but provide liability protection like a corporation. You can also choose to have an LLC taxed as a corporation if you wish. I have helped many clients use LLC for various purposes and I believe it is a business entity to consider for entrepreneurs looking to start a new business, or for those looking to convert a sole proprietorship or partnership into an entity that will provide liability protection.
For those unfamiliar with LLCs, “Form Your Own Limited Liability Company” by attorney Anthony Mancuso does a very good job of introducing the LLC in the first two chapters. Answer the top ten questions about LLCs, explain the benefits, and compare LLCs to other business forms. It also provides some basic LLC legalities by describing the number of members, the paperwork required to establish an LLC, the responsibility of managing an LLC, and the responsibility of members and managers.
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 the knowledge to discuss the topics further with your tax preparer.
The chapter on preparing the articles of organization for the LLC does a good job. Usually there are only a few basic items that should be included in these articles. One tip the author gives is to check your state’s procedures for archiving articles, which is very good advice. You should check with your state! In fact, many states have completed blank articles that you can use. Personally, I usually wrote different articles, which were similar to the examples in this book. But people should check with their state 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 in the book. Archiving articles is fairly simple, but an operating agreement requires a bit more. The author does a good job of pointing out what should be included in an operating agreement and provides a good sample to start with.
There is additional information that is good to know that will help a person operating an LLC. Things like changing operating agreements, signing documents, filing annual reports, working with tax advisers and attorneys. Appendix A contains very basic information regarding each state, but again, you really should check with your state, so the information in the Appendix is not that necessary.
The sample forms are in the Appendix in tear-off form at B and are also contained on an enclosed CD. The forms are: IRS Form 8832, LLC Name Reservation Letter, Articles of Organization, LLC Articles Cover Letter, Operating Agreement for Member Managed Limited Liability Company, Liability Company Management Operating Agreement Limited, Minutes of the meeting and a Certification of authority.
Overall, this is a good basic book for someone looking to learn more about LLCs and how to form them. Again, the most important chapters are those that help create operational agreements. The samples on the CD can be used as a starting point to create your own. I strongly believe in the need to educate yourself on all aspects of your business, and Mancuso’s “Form Your Own Limited Liability Company” is a great place to start if you need LLC education. If you think this business entity is right for you, check out this book to help you get started.