Questions to Ask a Lawyer About LLC

By Michele Vrouvas

While you may not need a lawyer’s help to complete the fill-in-the-blank forms required to set up an LLC, you can benefit from a lawyer’s advice in areas that have significant implications for running the company. Lawyers are familiar with federal tax law that determines the tax options available to certain LLCs. They can also advise you on how to comply with state business regulations so that your LLC remains in good standing.

Location

Because LLC laws vary by state, forming an LLC in certain jurisdictions might offer distinct advantages. According to attorney Richard Keyt, you should start by asking your attorney which state is the best forum for doing business. In particular, an attorney can advise you on which state provides more asset protection and whether it is worthwhile to choose a state simply because it does not tax income.

Tax Classification

Since the federal government does not recognize LLCs as a separate class for determining federal income tax, the company’s owners, also called members, must file forms with the IRS to elect a certain business classification. A lawyer can help you understand which classification the LLC qualifies for and what the tax implications of each are. For example, some LLCs might be eligible for the more beneficial pass-through taxation that is available to partnerships. Additionally, if your state has an income tax, consult with a lawyer before setting up the business to avoid forming an entity that might be classified as a corporation for both federal and state income taxes.

Ready to start your LLC? Start an LLC Online Now

Employer Responsibilities

Even a single-member LLC that pays just one individual to perform certain services for a day might qualify as an employer in some states and be required to comply with employer regulations. Ask your lawyer beforehand whether the services you have requested create an employer-employee relationship. If so, your lawyer can advise you on your rights to set the working conditions and your obligations to withhold state income tax from an employee’s wages.

Membership

Without state laws regulating the number of members needed to form an LLC, the owners are free to choose a single- or multi-member structure. Discuss the advantages and disadvantages of both with your lawyer before making any commitments. For example, being the only member might save you from disputes between members over how to run the business. However, as attorney Scott Edward Walker points out, a single-member entity might not protect you from personal liability for debts incurred by the LLC. An attorney can help you in the planning stages to establish proof that the LLC is separate from the individual who formed it.

Operating Agreement

Formal operating agreements, signed by each LLC member, that identify membership duties and procedures for governing the business can help resolve disputes without costly litigation. Consult an attorney during the drafting stages of this agreement to establish rules for admitting new members, preventing members from assigning their interest in the LLC to others, apportioning profits and entering into contracts with vendors.

Ready to start your LLC? Start an LLC Online Now
Sole Proprietorships With Independent Contractors
 

References

Resources

Related articles

What Should You Do When a Divorce Lawyer Does Not Respond?

When your lawyer stops communicating with you about your case, it increases the stress and anger of divorce. If you've hired a lawyer to represent you, you should at least have the peace of mind of knowing that a professional is in your corner. If your lawyer does not respond, there are steps you can take to re-establish communication and keep your case on track.

Do You Need an Attorney to Start an LLC?

Starting an LLC does not require the services of an attorney. All states permit any business owner to file the necessary forms that brings an LLC into existence. The information needed to prepare the forms is typically very basic and step-by-step instructions are provided with the forms to facilitate the process. However, starting an LLC simply brings a legal entity into existence and does not necessarily mean that the LLC is structured to meet your needs, the needs of any other owners or the business itself. An attorney's services can help address these issues.

A Professional Corporation vs. an LLC

Starting a new business is a big undertaking that requires making many decisions. Once you have developed a vision for the business, you must decide how to structure it. Each state has laws that govern the basic structure and specific rules for each type of business entity permitted in that state. Two examples of common business forms in all states are professional corporations and limited liability companies. PCs and LLCs are popular choices for small businesses. You must determine which business form will best suit your company's needs.

LLCs, Corporations, Patents, Attorney Help LLCs

Related articles

Benefits of a Limited Liability Company

Limited liability companies (LLCs) offer several benefits because they share characteristics with several types of ...

Can an LLC Be an Individual or Sole Proprietor?

A limited liability company is a common business structure which combines the limited liability of a corporation with ...

Ways to Protect a Sole Proprietor From Being Sued

It is especially important for sole proprietors to avoid lawsuits because they are personally liable to pay for all of ...

Can I Be Sued Personally if I Am an S Corporation?

Startup entrepreneurs can choose to organize their new businesses in several different ways. One popular form of ...

Browse by category
Ready to Begin? GET STARTED