How LLC Ownership Works in the USA

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    Want to learn how LLC ownership works in the USA? Before we get to LLC ownership, here’s a quick introduction to what an LLC is all about:

    An LLC or a Limited Liability Company is a popular entity type that provides personal liability protection to all of its owners. This means that your personal assets such as your home, bank accounts, car, etc. will not be liable for the debts of the business.

    LLC owners also stay protected against any business-related lawsuits. This limitation of personal liability is not available to the owners of Sole Proprietorships and Partnerships. That’s one of the benefits of LLC ownership in the USA.

    Read on to learn what it takes to become the owner of an LLC and how to get started.

    What is an LLC (Limited Liability Company)?

    An LLC or a Limited Liability Company is a legal entity that protects you from personal liability in most instances. This legal entity type allows you to take advantage of the benefits of both a Corporation (limited liability) and a Partnership (less complex process) business structure.

    Here’s how to form an LLC:

    • Find a Registered Agent, who will receive all legal mail and documents on the behalf of your company. They should have a physical street address in your state.
    • File Articles of Organization with the Secretary of State. This document will include your company’s name, address, and structure.
    • Acquire an Employer Identification Number (EIN)/Tax ID. You can use it for paying business taxes, hiring employees, and opening a bank account for your LLC.
    • Create an LLC Operating Agreement to define the financial and working relationships among LLC owners, managers, and other members.

    You’ll obtain LLC ownership in the USA once you complete all of these filing processes and paperwork. To make it easier, hire GovDocFiling to do the paperwork on your behalf. Doing so will give you more time to take care of other aspects of your business.

    Things You Need to Know About LLC Ownership in the USA

    We’ll be answering a few common questions that you might have about LLC ownership in the USA and how it works. Check them out below.

    Who Can Have LLC Ownership in the USA?

    Almost anyone can be the owner of an LLC including individuals, other LLCs, and foreign entities. Banks, financial institutions, and insurance companies cannot get LLC ownership in the USA.

    You can start an LLC on your own or with other co-founders (LLC members).

    What Are the Owners of an LLC in the USA Called?

    The owners of an LLC in the USA are called “members.”

    If you are the single owner of an LLC, the company will be called a “single-member LLC.” In the case of two or more owners, it will be known as a “multi-member LLC.”

    How Much Does LLC Ownership in the USA Cost?

    To become the owner of an LLC, you need to pay the initial state and federal filing fees. Additionally, you’ll also need to pay an ongoing annual reporting fee for running your LLC in most states of the USA.

    The state filing fee for an LLC may vary from state to state. It can cost anywhere between $50 to $500 for you to form an LLC.

    Similarly, the ongoing annual reporting fee also depends on the state where you are forming your LLC. For example, California will charge you $800 per year for owning an LLC in the state, which is too high for most small businesses.

    How Are Profits and Losses Passed on to LLC Owners?

    The best part about LLC ownership in the USA is that the profits and losses of your LLC will be passed through to your personal income without any corporate taxes. However, as the owner of an LLC, you will need to pay self-employment tax for medical and social security.

    What if there is more than one owner? How will the profits and losses pass through then? Here’s how LLC profit sharing works:

    • LLC profits are allocated to members in proportion to their ownership interests, by default.
    • Your LLC can also choose to use a different structure for distributing profits, which should be clearly defined in writing in the LLC Operating Agreement you submit.

    Ready to Become an LLC Owner in the USA?

    We included everything you need to know about LLC ownership in the USA. Now you have a better idea about what an LLC is, who can form one, how to form an LLC, and more.

    Now is the time to register your business as an LLC and protect your personal assets from business debts and lawsuits. If you need help forming an LLC in the USA, you can always get in touch with us.

    Start a conversation with our LLC formation experts to get the state and federal filing process of your Limited Liability Company completed correctly.