If you are considering forming a new company, many people decide that a limited liability company (LLC) will be the best type of company structure for them. However, selecting to form a LLC may be the easy part! There are many considerations when setting up your LLC. We’ve listed just a few below.
- Should your LLC be member managed or manager managed?
- Which member is running the business?
- Which member is best suited to be the manager?
- Are there certain decisions that need the approval of the other members?
- What are the consequences if one of the members is putting in money or capital and another is providing sweat equity?
- Are buy-sell provisions needed on the death, disability or divorce of one of the members?
- If one of the members is actively involved in the business of the LLC and the other is not, is there a mechanism for removing the member who is running the business if that member isn’t performing?
- If a member leaves, are restrictive covenants necessary to protect the business interests of the LLC?
- How should the LLC be taxed?
- Is the LLC a disregarded entity and taxed on a Schedule C of the member?
- Should the LLC be taxed as a corporation? If yes, should a Subchapter S election be taken?
- Should the LLC be taxed as a partnership?
- What are the reasons for forming a LLC versus a corporation?
- Are there any measures that can be taken by a member to help protect both the assets and the business of the LLC from creditors of a member?
These are some of the questions that we ask our clients to consider when helping them form a LLC. The issues are unique and depend on both the type of business as well as the venture. Having a qualified lawyer help you answer these and other questions, will ensure that you have a LLC that fits your business and your needs.
