Who can start an LLC

What is an LLC

A limited liability company (LLC) in the U.S. is a flexible business structure which protects its owners (members) from being personally pursued for its debts or liabilities.

LLCs are essentially a hybrid entity that combine the many business structure characteristics and let you take advantage of the sole proprietorship, corporation, and partnership business structures.

Who can start an LLC?

The following individuals or entities can be LLC owners in all 50 states:

• US citizens
• Non-US citizens
• US residents
• Non-US residents
• US foreigners
• US immigrants
• Other LLCs
• Other corporations (both C and S-corporations)
• Pension plans
• Trusts
• Individual retirement plans (IRAs)
• Other legal entities

Note however that non-US citizens must possess a green card or E-1 or E-2 visa to own an LLC; an ITIN card is not enough, although it will qualify you to be an S corporation shareholder. 

The ITIN will be needed for non-resident LCC owners when it comes time to file taxes, as this will identify them to the IRS. It can be obtained by filing form W-7 with the IRS. Regular US residents use their Social Security number for this.

Typically, there are no residency or legal restrictions as to who can start an LLC. However, some states impose requirements that members and/or managers must be at least 18 years of age, or the age of consent. 

How many people are needed to form an LLC?

There is no requirement specifying the maximum number of members (owners) an LLC can have. The IRS does allow one-member LLCs to qualify for pass-through tax treatment. Taxation of the one-member LLCs at the state level may be different.

Owning an LLC as an Individual

When an individual owns an LLC, they are the owner of a single-member LLC. To own a single-member LLC, you do not need to be a resident of the state in which you intend to register your LLC, although your registered agent does. 

Owning an LLC as a Group

When a group owns an LLC, the owners are part of a multi-member LLC. As a member, your responsibilities, powers, and ownership interest need not be proportional to your investment in the company; these can be divided up in any way that the ownership group sees fit. 

Furthermore, ownership interest is not permanent unless the operating agreement specifically makes it so; current members may sell or transfer their interest and new members may be added if so desired.

Do I need an attorney to form an LLC?

No, you can prepare and file the Articles of Organization – one of the most important LLC forms needed. Be sure you understand the requirements of your intended state of incorporation. 

Rules for LLC Membership

LLC owners are referred to as members, and a few rules apply to them.

• LLCs can have an unlimited number of members, or may also only have one member. Single-member LLCs are now allowed in every state in the U.S.
• LLCs may be owned by individuals, other LLCs, foreign organizations or corporations.
• A board of directors is not required for an LLC, nor does it need to keep meeting minutes. 
• LLCs may be managed by their members or by non-members, although in some states the LLC must have at least one manager who is a member.
• If one of the LLC members decides to leave the organization, the LLC has to be dissolved and re-formed with the new group of members.

Examples of LLC businesses

An example of a limited liability company is a pet-sitting business with an owner who hires several contractors and needs liability protection based on what her contractors might do.

Another example of an LLC business is a tennis coach. A freelance tennis coach is self-employed but does business as ‘San Diego Tennis Coaching Services’, without setting up a legal business entity. As an alternative, he can set up an LLC to look professional, reduce his taxes and reduce his legal liabilities.

He can set up a separate business bank account, website and create a home office. Instead of asking clients to hand him cash or write checks to his name, he can accept payments to ‘San Diego Tennis Coaching Services, LLC’. He can also pay bills using corporate checks or business accounts.

An LLC has many benefits including the fact that the owner can take a regular salary, a draw or a distribution of income, depending on the tax benefits he wants to receive. 

Other LLC examples include:

• Basketball coaches
• Clothes stores
• Food trucks
• Cafes
• Plumbers
• Electricians
• Yoga instructors
• Self employed businesses

How to start an LLC?

To start an LLC, you’ll need to:

• 1). Select the State to setup your LLC
• 2). Name Your LLC
• 3). Choose a Registered Agent
• 4). File LLC Articles of Organization
• 5). Create an LLC Operating Agreement
• 6). Get an EIN (Employer Identification Number (EIN)

After you decide to form an LLC, Articles of Organization LLC forms must be filed, and state and initial fees must be paid. The LLC formation can be done via a Professional LLC service or by submitting the documents yourself to the relevant state department.

Professional service firms can also assist owners should they need to shut down old companies, prior to their LLC setup.  

After your LLC forms are filed, it is recommended that your LLC hold an organizational meeting of the members/managers. This meeting will help to start an LLC by adopting an operating agreement, issue membership interest certificates to members, and undertake other preliminary matters such as authorizing the opening of a bank account for the LLC. 

Cost of starting an LLC?

The main cost of forming a limited liability company (LLC) is the state filing fee. This fee ranges between $40 and $500, depending on your state, excluding add-ons. 

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