- You ever wonder why so many companies are formed as LLCs?
Why not a corporation or a partnership?
What's so special about this LLC thing?
Stick around, because I'm gonna break down
the top six benefits of forming and operating as an LLC.
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Hi, I'm Aiden Durham, Business and Branding Attorney
with 180 Law Co in Colorado.
In the eight plus years
that I've been a practicing attorney,
I have formed probably,
I mean over a hundred LLCs for my clients.
What I have found to be especially interesting
is that most of these people, most of my clients know
that they want to form an LLC for their business
but not many of them really know why they wanna do that.
And you know what I don't like?
When people do things
because they think they're supposed to,
I want you to know why you are doing what you're doing.
I don't want you doing it just
because that's what everybody else does.
And you think you should be doing it.
I want you to know why you are actually doing it.
So in this video, I'm gonna break
down the top six reasons why you would want to form an LLC.
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at Tailor Brands for partnering with us for this episode.
Tailor Brands is a one stop shop
for aspiring business owners.
It's really an all in one solution.
If you've got this great idea for a business
but you don't really know where to start.
From registering your LLC to designing your very own logo,
Tailor Brands offers everything you need
to launch your business all in one place.
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All right, let's get into these top six benefits
or reasons why you would want to form an LLC.
The first reason, probably the most common
or popular reason we would want to form
and operate as an LLC
is for personal liability protection.
The main reason or at least one of the main reasons
that a lot of us form and operate as an LLC
is because we want to protect our personal liability
and our personal assets.
By forming an LLC,
we have created an entity that is separate
and distinct from ourselves.
And so if there are debts, liabilities
or other obligations of the LLC, they belong to the LLC
and they're not our personal debts or personal liabilities.
If the LLC gets sued our personal bank accounts,
our own home,
our personal assets will be protected and safe.
That is the number one reason that we typically operate
and form as an LLC.
But that is not a Bulletproof protection
that we get from the LLC.
There is of course, this concept of piercing
the corporate veil.
Instances where a judge or a court will set aside
the LLC form and hold the members
or the owners of the LLC personally responsible
for the businesses, debts and liabilities.
So there are a lot of things
that we have to do in order to uphold
and keep that liability protection and avoid piercing
the corporate veil.
Things like having separate bank accounts
for business and personal, not commingling assets,
our business and our personal assets.
I made a lot of videos about the risks, particularly
of single member LLCs and how you can avoid those risks
and avoid piercing the corporate veil.
So I will link to some of those in the description
if you wanna learn more.
Aside from that personal liability protection,
the next benefit or another reason why
you might wanna form an LLC
is for some of the tax benefits.
Now between an LLC and a sole proprietorship
or an LLC and a partnership,
you're not really see a whole lot of difference in taxes.
And LLC is considered a pass through entity.
And because it's a pass through entity,
it avoids having to pay corporate tax
or what we might call double taxation
which occurs in a traditional corporation,
a C corporation.
In a C corporation, the company,
the corporation pays its own income tax,
pays its own tax on the income that it generates.
And then it pays out its profits to its shareholders
and the shareholders then have to pay taxes
on what they received as income.
So in that sense the income is being taxed twice,
once to the corporation then again, to the shareholders.
That doesn't happen in a pass through entity.
It's only taxed once at the individual or personal level.
So operating as an LLC gives you that liability protection
but avoids that double taxation like you would have
in the C corporation, but you also have the option
as an LLC to elect, to be taxed in a different way
such as an S corporation or even a C corporation.
So it really is that flexibility and the ability
to be taxed either as a corporation
or as a pass through entity
which is why we really like an LLC in a lot of cases.
The third benefit to forming an LLC
is that for the most part
it's relatively easy and inexpensive to form,
especially compared to a corporation.
Of course, this is going to vary state by state.
Every state is different with regard to their fees
or exactly what's required to set up an LLC
but the filing fees generally are gonna be
from 50 up to maybe 500, a few 100 bucks,
again, depending on the state,
but it's typically going to be cheaper
than maybe forming a corporation.
And it is especially easy
if you use a tool like Tailor Brands.
You just click the link in the description,
choose your state, and then hit Get Started.
Then we will enter our LLC name.
For my LLC, I'm going to call it what else,
Rocky's Riches hit continue.
Then we're gonna gonna tell it what type
of business this is, physical goods, offering services,
leisure and hospitality.
Maybe you are creating original content, technology
or software or something else.
You can enter it there.
We are going to select physical goods
for Rocky's Riches, then hit Next.
Then we tell it what stage our business is at,
whether we are ready to launch, still planning
or already making money, if we are going to have employees,
let it do a little thinking,
and then we will tell it what state we want the LLC
to be formed in.
I'm going to form in Colorado,
give it a little bit of information, your name, phone number
and email address.
Then select the suffix that you want for the LLC,
whether you want it to be LLC,
limited liability company or something else.
I like good old LLC.
We can sign up for registered agent service as well
or appoint our own registered agent.
They even got these helpful tips here
letting us know what a registered agent is.
We can add an EIN or employer identification number
to the package if you want them to get that for you as well.
Annual compliance is always a good thing to have,
make sure your annual reports are filed on time.
And we can even add an operating agreement
onto our package here.
If you wanna speed up the filing
you can do that or just go with regular processing.
And then finally look over everything you've got.
We've got the LLC filing.
They're gonna do a name availability search
and that priority support for Rocky's Riches, LLC.
We've got the registered agent
employee ID number, annual compliance, operating agreement
and expedited filing.
If everything looks good, click Pay Now
enter your payment info
and then let Tailor Brands do the rest.
It really doesn't get easier.
My number four benefit
of forming an LLC is that there's typically
going to be less paperwork
and fewer ongoing compliance requirements compared
to a corporation.
In many states, when we set up a corporation
the state has requirements
that we have maybe in initial shareholder meeting
or a board of director meeting.
There are requirements in many states
for annual meetings or keeping meeting minutes.
Corporations have a lot
of statutory requirements, typically.
LLCs on the other hand,
usually don't have these requirements.
There are typically more options, not requirements
where a corporation must have an organizational meeting,
an LLC may have it, where a corporation must hold regular
or annual meetings,
a LLC may call regular or annual meetings.
All of these requirements
that we would typically generally see in a corporation
are almost always going to be optional for us LLCs.
The next benefit to operating as an LLC
is that we get a lot of flexibility with regard
to management and managing the operations of the LLC.
LLCs can be member managed where the members
or owners of the LLC are in charge
of the day to day operations and are able to act on behalf
of the LLC or LLCs can be manager managed
where the members elect managers who are in charge
of the day to day operations and can act
on the LLC's behalf.
But there are also situations
where we could have like a board of managers, similar
to a board of directors in a corporation.
So really, regardless of how you want to structure
the ownership or management of your company,
you can usually do so pretty easily with an LLC.
And finally, the last reason, my number six reason
or benefit of forming an LLC
is that it can give you some credibility in your business.
Operating as an LLC lets people know
that you're taking your business seriously.
This isn't just a hobby or a fly by night thing
that you may be done with,
no you're in investing serious efforts,
you've invested money into forming a legit business
for your legit business and it makes you more legit.
So all in all, it's a good idea to form an LLC.
If you're looking for personal liability protection,
flexibility, with regard to your taxes
an easy and inexpensive setup process,
fewer ongoing compliance requirements,
management flexibility and business credibility.
Of course, it's always best to consult with an attorney
and have an attorney help you with the LLC setup process.
Every state's different.
Every state's going to be a little different
with regard to what is required,
what kind of info you need to provide.
So it's best to have an attorney help you with it
so you do everything properly.
Another option if you can't afford to work
with an attorney is to use a trusted service
like Tailor Brands, whether you're just getting started
and wanna set up your LLC, or if you're already up
and running and just wanna freshen up your logo
and other brand assets, Tailor Brands has you covered
with their all in one solution.
Don't forget, you can check them out at this link
and use the code AllUpInYoBusiness40.
That is AllUpInYoBusiness40
to save 40% on Tailor Brands' plans.
If you got value out of this video, go ahead
and gimme a thumbs up and don't forget to subscribe
and share this video with all of your friends.
Check the description as well for more resources
like my Ultimate New Business Checklist
that you can download for free.
Thank you so much for watching,
I'm Aiden Durham and I'll see you next time.
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