Starting an L.L.C. (Articles of Org & Structure-Related questions)

[yoyoyoyoyo]

Do I need an Employer Identification Number if I wish to sign on Independent Contractors?

Do I need a Business Account from a bank to write checks to vendors?

If I start an L.L.C. with a partner (who I am sharing the earnings/losses with on a 50% basis), is my business manager-managed, or member-managed?


Thank you,
YoYoYoYoYo :)

[Evan]

If your comfortable giving out your SSN, you do not need an EIN. As the process is simple, I recommend applying for one for the LLC. If you hire employees, one will be required.

You will need a business checking account. An LLC is a seperate legal entity, and you need to treat it as such. Otherwise, it will be viewed as an alter ego, and you will not have limited liability.

If you start the LLC with a partner, you WOULD need an EIN. Further, you can choose whether it is member-managed (similar to a corporation), or manager-managed (similar to a partnership). It's a matter of preference.

[Business Attorney]

If you start the LLC with a partner, you WOULD need an EIN. Further, you can choose whether it is member-managed (similar to a corporation), or manager-managed (similar to a partnership). It's a matter of preference.

Actually, there are some distinct legal differences between a member-managed and manager-managed LLC. In a manager-managed LLC, members generally have no power to bind the LLC. This is particularly important where one member is intended to be simply an investor or where you have a minority owner, say a key employee, and you intend to make the day-to-day business decisions.

[Evan]

Actually, there are some distinct legal differences between a member-managed and manager-managed LLC. In a manager-managed LLC, members generally have no power to bind the LLC. This is particularly important where one member is intended to be simply an investor or where you have a minority owner, say a key employee, and you intend to make the day-to-day business decisions.

Correct. I had a bit of dyslexia, and I meant member-managed is similar to a partnership (everyone can bind the LLC), versus manager-managed being similar to a corporation (only managers can legally bind the LLC, members are like shareholders).

One potential benefit to of a member-managed LLC is that often states only require the name of managers to be listed in an annual report, and not managers. This can provide a degree of anonymity to the LLC if that is desired.

[yoyoyoyoyo]

So I will need an EIN, a bank account for the Biz, and we are member-managed; as the partners are in control of the biz and direction thereof.

Thank you, kindly, for your help :)

[Evan]

as the partners are in control of the biz and direction thereof.

You mean the managers? :D It's all a shuffling of words.

[Business Attorney]

Even if the two individuals who are currently members are also actively managing the business, it often makes sense to choose a manager-managed structure for your LLC from the inception. That makes it easier to add members later who do not have the same rights to participate in management. Upfront planning can help you avoid the cost and hassle of significant changes later on.

[yoyoyoyoyo]

yikes, good catch!

Thanks guys.

[low bidder]

Two books I used to form my LLC: "How to Form and Operate a Limited Liability Company" Gregory C. Damman; "Form Your Own Limited Liability Company" Anthony Mancuso. One was more helpful than the other, can't remember which.

[prova.fm]

The best business books written are by Nolo. I read & formed an LLC on my own using Nolo's 'How to form an LLC in California' (or something like that). Great info, explained everything really quick & easy. It's easily accessible at a library. Of course, the CA version won't help if you're in RI, but they have a version for you (I think).

-David

[Business Attorney]

I also have a lot of instructions (for free!) on the site in my signature, with a page for each state. Some states' pages are more complete than others, although a full book on the subject obviously goes into more detail than I do.

[Evan]

I also recommend looking to see if your Secretary of State's office can provide you more information. There a lot of tricky things that can sometimes throw you off.

For example, in Rhode Island, a LLC is required to pay the minimum business tax ($500) annually -- regardless of how it is taxed. The form for it is the RI-1120S, and there is a box that says LLC. If you were taxed as a partnership, or as a disregarded entity, you may be inclined to file the RI-1065 or no form respectively. Though you'd be wrong.

Most information you find about an LLC would be the filing fee ($150 in RI) and the cost of the annual report ($50). An important consideration is how you are taxed on the state level, and somehow this seems to be overlooked by many.

[Evan]

As another point, in Massachusetts, an LLC pays a $500 annual report fee, and the fee to be an LLC is more than a corporation. Though a Mass S-Corp would pay a $456 annual tax, plus a $50 annual report fee.

To my knowledge, being a Mass LLC taxed as a corporation would be a very bad mistake from a tax perspective.

[yoyoyoyoyo]

...There a lot of tricky things that can sometimes throw you off...

yes, that's what i've been coming to find.

For some reason, when you put something down into "legal jargon" it becomes difficult to read. But when having a conversation with someone, it's easy to understand them [such as on these forums] when they're speaking plain english :cool: