The process of forming a US LLC is simple. It necessitates filing article of organization with the State of Formation, completing a fill-up form and paying a state filing fee.
An LLC and an S-corporation are a pass-through entity that pays tax through individual income tax code. S-corporation, Partnerships, LLC and Sole proprietorship are all pass through businesses in contrast to C-Corporations which are not.
Anyone can form an LLC, but everyone can not generate income as an LLC. A salaried person could theoretically quit their job, create an LLC and sell their freelance services back to their company to avoid paying higher income tax.
Once a corporation ‘s name is finalized, it is required to be registered with the Secretary of State. The article of incorporation must be drafted and filed with the State. The stock certificate can be issued to the initial shareholders upon creation of the business.
A C-Corporation is taxed twice on the owner’s profit. Once at the corporate level and again at the personal level. An operating agreement or by-laws are the rules with which the company is governed. The company owners could generate, review, signed, and store a full set of stock issuance documents.
Smaller companies that don’t need the unique ownership structure of a C-corp – or the ability to sell shares to the public will organize as LLC’s or S-corporation.