What Is an LLC License?

By Kevin Owen

A limited liability company is a type of business structure that shields the owners of the company from personal liability for the financial dealings of the operation. An LLC does not pay federal taxes since the profits are only reported on the owner's tax return as personal income. The creation of an LLC is governed by state law and members must file certain documents with the appropriate state department to gain approval to operate as an LLC.

A limited liability company is a type of business structure that shields the owners of the company from personal liability for the financial dealings of the operation. An LLC does not pay federal taxes since the profits are only reported on the owner's tax return as personal income. The creation of an LLC is governed by state law and members must file certain documents with the appropriate state department to gain approval to operate as an LLC.

Formation

Although each state has its own laws and regulations governing the formation of an LLC, they have many similarities. Businesses applying for LLC status are required to have a name unique from any other business incorporated in the state. Applicants are also required to file a standard form issued by the state identifying the owner and resident agent of the company as well as the nature of the business along with the LLC's articles of incorporation. Many states also require the company to file proof of liability insurance and federal tax identification numbers. Most states also require payment of a filing fee.

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Effect of Registration

Once approved, the newly formed LLC is authorized to conduct operations state-wide. It gives the company its own legal identity enabling it to accrue or incur debts, own and lease land, buy and sell items, enter into contracts, and engage in political speech. Most states require LLCs to follow the formalities of maintaining separate financial records from the owner's personal expenses and to hold corporate meetings.

Foreign LLCs

Although an LLC is authorized to engage in business in the state in which it registered, it must also file a registration form to operate as a foreign LLC in other states in which it intends to conduct activities. This filing process is usually simpler than forming an LLC as it only requires the payment of a fee and the filing of a form with the new state along with a certificate from the company's home state showing the company is in good standing.

Dissolving an LLC

If business owners determine that they no longer want to operate the company as an LLC, or wish to shut down the operations altogether, the business must follow formal procedures dissolving the LLC. These procedures require the filing of appropriate forms with the state as well as notifying creditors of the dissolution of the company. Once the LLC status is dissolved, the company no longer has the privileges of operating as a limited liability company and may need to reorganize and obtain other business licenses in order to continue operations.

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Purpose of Filing an LLC With a State

The limited liability company business structure -- commonly referred to as a hybrid of the corporation and partnership -- is only an option if you adhere to all filing procedures in the state in which you want to create the entity; this doesn't necessarily need to be the state in which you operate. This is because legal formation of the LLC cannot occur without filing the proper documentation with the secretary of state, or similar agency, in your jurisdiction. But this is only the initial purpose; there are other reasons why you may want to file documentation to form an LLC in one or more states.

What Is the Difference in an LLC & Owner/Proprietor?

Limited liability companies, or LLCs, and sole proprietorships are two different forms of business. For a new owner starting a business, the choice of form is a very important decision. People thinking about creating a business should seek professional advice.

What's an LLC?

An LLC, or limited liability company, is a flexible form of business entity that provides its owners with the safeguard of limited liability. An LLC can have any number of owners, known as members, so the entity is suitable for both sole proprietors and larger businesses. Although each state has its own laws for LLCs that are registered within its jurisdiction, the general rules regarding formation, limited liability, taxation and operation of the LLC are broadly similar.

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