What is it?
There is a presumed air of strength and prestige to a business when it adds an LLC (Limited Liability Company) suffix to its company name. But that perception is just a part of what incorporating a business actually does. Many small business owners launch their companies as sole proprietorships, meaning they and their business are essentially one and the same. However, changing the format of a small business to a Limited Liability Company offers quite a list of advantages for entrepreneurs. Most notable is that an LLC protects an entrepreneur’s personal assets if debts or legal judgments are filed against the business.
Anyone can get an LLC. The paperwork varies with each state but is fairly simple and straightforward. In Maryland the filing fee is $100, payable to the State Department of Assessments and Taxation. You will also need to pay $20+ $1 per page of your Articles of Organization (application) and $20 for a Certificate of Status at the time of filing. LLCs are also required to appoint a Registered Agent at the time of filing for Articles of Organization. This is a person designated by the LLC to accept legal process, i.e. any notice or demand that is served upon the company.
The Maryland State Department of Assessments and Taxation provides downloadable fill-in-the-blank forms and instructions, making the LLC filing process very easy. Of course, if you’re trying to decide whether the LLC is the right structure for your business, you may want to consult an expert. You may also want an expert to review your operating agreement or set up your bookkeeping and accounting systems and go over all the requirements Maryland expects of an LLC.
So how does it really help me and my business?
Yes, it adds stature to your business name and protects you legally, but what exactly are the benefits?
Briefly, here are some points to understand in regard to filing for an LLC for your small business.
An LLC will bring you credibility with you customers and clients. That LLC after your company name can raise your company standing, make it appear larger and more established.
That LLC behind your name protects your personal assets. Sole proprietors and partners are liable for business debt and any lawsuits filed against their business. An LCC keeps your personal identity separate from your business identity. Creditors can’t lay claim to your home, cars, or savings. Equally important,
in an LLC, the owner has liability protection against the acts of his employees, too.
Maryland law recognizes businesses operating as limited liability companies and classifies them as partnerships for Maryland tax purposes. Accordingly, your LLC will not be taxed on its net income. Instead, members must include in their Maryland taxable adjusted gross income their distributive share of LLC income. While an LLC permits an unlimited number of members to enjoy the benefit surplus of their individual ownership percentage, if there is just one owner, the company will be taxed as a sole proprietorship.
When your business is an LLC, there is no legal entanglement when the owner retires or dies. The LLC is a legally binding business structure that endures retirement and death.
The state of Maryland also allows a business with no employees other than the owner to file as a Single Member LLC (SMLLC). All income from an SMLLC will be reported on schedule C of the individual’s 1040 form. For additional restrictions of the SMLLC contact a professional.
These are just some of the important benefits to of forming an LLC for you to consider when choosing the structures of your business. It is always recommended that you consult an expert to find the best structure to fit your business.
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