One of the most important things you can do to start your new business on the right footing is to select the appropriate legal structure. Limited liability companies, or LLCs, have become a popular entity choice for many businesses, as they offer protection from personal liability without the complexity of corporations. Find out whether this might be the right option for you when you contact Bingham Legal Group PC for help. An experienced business formation lawyer in Michigan can review your goals, advise you on the best way to achieve them, and draft the necessary documents on your behalf. Don’t wait—let’s get started today.
Benefits of Forming an LLC
Many entrepreneurs and business owners choose to structure their companies as LLCs because of the specific advantages and benefits provided by the LLC form. These include:
- Personal liability protection: One of the primary features of a limited liability company is that it protects the personal assets of the company’s owners, since the form limits members’ liability for the LLC’s losses to the value of their investment or capital contribution to the company. The LLC’s creditors cannot pursue payment from the members unless the members have signed guaranty agreements.
- Tax flexibility: By default, LLCs have pass-through taxation as a disregarded entity (for single-member LLCs) or partnership (for multi-member LLCs). However, LLCs can also elect pass-through taxation under Subchapter S (if the company’s structure qualifies) or corporate taxation under Subchapter C.
- Simplified management: LLCs can avoid many of the formalities of corporations, such as having a board of directors, while still allowing members to establish management structures that suit their needs and goals.
- Credibility and growth potential: Having a formal legal entity, such as an LLC, can give a business a more professional image, while the legal structure allows the company to bring in new members or investors.
- Flexible ownership structures: LLCs offer flexibility in structuring ownership, management rights, and distribution of profits and losses.
Key Steps in Forming an LLC
Establishing an LLC involves the following steps:
- Choosing the company name: To select a name for an LLC, you must consider trademark rights (including ensuring that the name does not infringe upon an existing company’s trademark) and state LLC naming requirements.
- Selecting a registered agent: An LLC must designate an individual or organization to accept service of process on its behalf.
- Filing articles/certificates of organizations: An owner or organizer of an LLC formally establishes the business by filing articles/certificates of organization with the state.
- Drafting an operating agreement: An operating agreement serves as the governing document for an LLC, defining ownership, management authority, profit distribution rights, and decision-making procedures.
- Obtaining an EIN: Most LLCs will need an employer identification number from the IRS, which serves the same purpose as a person’s Social Security Number, even if the company will not actually employ anyone. An LLC may need an EIN to register with state taxing authorities to remit payroll, sales, or excise taxes, and many financial institutions require an EIN for an LLC to open a bank account.
An LLC formation attorney can guide you through the process to ensure you complete each step correctly.
Why You Need an LLC Formation Attorney
A business attorney from the law firm of Bingham Legal Group PC can help you register and structure a limited liability company by:
- Avoiding common mistakes, such as improperly completed or misfiled documents, inadequate provisions of operating agreements, or tax misclassification
- Taking account of your operating agreement to your and your business partners’ needs, concerns, and goals to minimize the risk of internal disputes
- Advising you on local, state, and federal regulations
- Working with you and your tax advisors to choose the most advantageous tax status
- Structuring the business for growth, addition of members or investors, or ownership succession
While you might have considered using online templates and filing services, these options cannot provide customized legal advice to ensure your LLC’s structure serves your specific objectives and circumstances. Don’t put the future of your business at risk. Instead, get the benefits of having an experienced, knowledgeable attorney in your corner from the start.
Why Choose Bingham Legal Group PC?
Working with experienced legal counsel can help you avoid the pitfalls and mistakes that could jeopardize your business. Let an LLC formation attorney from Bingham Legal Group PC help you set up your limited liability company because:
- We know how hard you work for your company, and we will work just as hard to provide you with tailored legal solutions that enable you to achieve your business goals.
- Our lawyers have over six decades of experience advising business owners across the Detroit metro area and throughout Michigan on a wide range of legal matters.
- Our firm focuses on providing personalized attention and service. When you choose to work with us, our team will take a collaborative approach so that you benefit from our collective knowledge and experience.
Frequently Asked Questions About LLC Formation
Still have questions about the LLC formation process in Michigan? We have the answers.
Can I form an LLC with members who live in other states?
In most cases, you can form an LLC with members who reside in other states, as most jurisdictions do not have residency requirements for LLC members. However, should you choose to operate an LLC in a different state from where you formed it, you will need to register the LLC in the state where you do business as a “foreign” LLC.
Do I need an operating agreement as a single-member LLC?
Although Michigan, like most states, does not require a single-member LLC to have an operating agreement, an owner can still benefit from executing one. An operating agreement can protect the LLC and its single member by reinforcing the LLC’s status as a separate entity from its owner and setting formal procedures for the owner to govern the business.
What’s the difference between an LLC and an S-Corp?
A limited liability company refers to a type of legal structure that a business can take. The term “S-Corp” refers to a business, usually a corporation, that has elected taxation under Subchapter S of the Internal Revenue Code, which allows for pass-through taxation (meaning that owners bear liability for taxes on the company’s income and profits). An LLC can elect S-Corp status if it meets the statutory requirements.
Can I convert an existing business entity into an LLC?
Like most jurisdictions, Michigan permits business owners to convert an existing legal entity into a limited liability company. Michigan allows for “statutory conversion,” which means a business can convert from one entity type to an LLC by filing the appropriate paperwork with the state. In states where a company cannot use a statutory conversion, it can convert into an LLC by merging with a newly formed LLC that becomes the surviving entity or by selling its assets to the LLC. However, a merger or asset sale can have various legal and tax implications, making it critical to seek counsel from a business lawyer.
Contact Our LLC Formation Attorneys Today
Are you thinking about organizing your new business as an LLC in order to enjoy the protections and flexibility the entity affords? An experienced lawyer can help you understand the pros and cons of LLCs and walk you through the formation process. Contact Bingham Legal Group PC today for a confidential consultation with an LLC formation attorney and learn how our law firm can help you achieve your needs and business objectives.