The National Association of Small Business’ “2015 Economic Report” indicates that 42% of of small businesses are S-corporations and 23% are limited liability companies, or LLCs. If you would like to form your LLC, then there is some basic information that you will want to learn about. Furthermore, there are also some details regarding S corporations that may be of interest.
How to Form an LLC
Will your LLC have 1 or more owner? This is important because the IRS will classify your LLC according to this criteria. If there is more than 1 owner, then your LLC will be classified as a partnership. Otherwise it will be classified as a disregarded entity.
Creating Your LLC Name
It’s important that you follow 3 basic rules when naming your LLC:
- The name needs to be different from an LLC that already exists in your state.
- The name needs to include an LLC designation.
- The name must not contain words that are specifically restricted by the state.
How LLC Ownership is Expressed
There are 2 ways in which LLC ownership can be expressed. The first is by percentage, and the second is by membership units. The latter is similar to corporate stock shares.
Announcing the Formation of Your LLC
There are 3 states that will require you to announce that you are forming an LLC in the newspaper. This is referred to as “publication.” The following states require that you publish your intention to form an LLC in a newspaper:
- New York
How to Form a Corporation
S corporations aren’t able to have more than 100 share holders. It’s also important to note that each shareholder has to be a United States’ resident.
How a Corporation May Re-elect S Corporation Status
When corporate status has been terminated or revoked, the party or parties need to wait until the 5th year following the year in which this became effective. At this time, they may re-elect S corporation status.
How Corporations Are Taxed
For tax identification purposes, an employer needs to obtain an identification number, which is referred to as EIN. This can be accomplished by filing Form SS-4 with the IRS.
When corporations are taxed by the IRS, there are 2 options available. The first is as a C corporation, and the second is as an S corporation. S corporations, however, just have a single taxation level.
Find Out More Information to Form Your LLC
When you want to form your LLC, it’s important to consult with an attorney that has experience with forming these types of business entities. It is also important to contact the IRS to ensure that you have processed all of the appropriate forms for tax purposes.