The Latest News on LLC Formation in the US
There have been large developments regarding LLC formation and LLC formation services in the US. Ranging from New York’s new LLC requirement, LLCs taxation, LLCs being able to have multiple names, as well as which state is best to form an LLC in. This article will cover some of the latest LLC formation news in the US to keep you updated and informed when venturing to start an LLC.
New York LLC Publication Requirement
All limited liability companies, such as LLCs, LPs, LLPs, and PLLCs, who operate their business in New York are required to publish notices in two local newspapers (a daily and a weekly) for six consecutive weeks within 120 days of formation.
Once the publication has been completed, the LLC is required to obtain an Affidavit of Publication and submit it with a Certificate of Publication form to the New York Division of Corporations – per Section 206 of the NY State Limited Liability Company Law. The notices have to be published in the country where the principal business address is located.
If the business is located in New York City, the publication fees could easily reach above $1000. Luckily, this expensive requirement does not apply to all states. Other states do have specific requirements, such as Florida which requires a Florida registered agent for all businesses in the state.
LLCs receive pass-through taxation. Pass-through taxation can either be under the IRS tax treatment of a sole proprietorship or partnership, depending on how many owners the LLC has. The business income will pass-through to the LLCs owners’ personal tax returns. Partnerships are also able to file an information return which reports how the profits or losses were divided amongst the members of the LLC.
LLCs also have the option to be elected to be taxed as an S-corporation. This allows the owners to save money on self-employment taxes on certain portions of their income. This tax election is made available when the LLC has significant profits. If LLCs choose to follow this route, they would eventually find it beneficial to elect a C-corporation tax treatment.
This results when the savings from income splitting and deducting benefits outweigh the additional cost of corporate double taxation.
LLCs are allowed to have multiple names
The name chosen for an LLC has to be unique and distinguishable from all other registered LLCs and entities within the specific state. Specific regulations exist around naming, for example, the name is required to have a corporate designator that has been approved by the specific state’s corporation code. Specific words are restricted while other specific words can only be used if the business owner has gotten approval.
A name availability search has to be performed, and once that has been done the business owner is able to file the Articles of Organization. LLCs also have the option of having multiple business names. To acquire this, they would have to file a fictitious name in addition to the LLC.
LLCs are better off being formed in the specific state of business
When starting a new LLC, most business owners choose to start it in their home state or in the state where their business is located. But, business owners are able to form an LLC in any state, even if their business or home is not located there. This would be called a foreign LLC.
Seeing that all states have different laws for LLCs, some states have become more attractive than others. Examples of these states are Delaware, Nevada, Wyoming, Alaska and South Dakota. Delaware offers low fees and taxes and they do not tax out-of-state income for foreign LLCs.
Nevada has no corporate income, personal income or franchise taxes. Wyoming charges no corporate income, personal income or franchise taxes, and the reporting obligations for business owners are kept to a minimum. Alaska charges no state income tax or sales tax. South Dakota does not have state income tax and they have a 0% corporate tax rate.
But, when starting an LLC, business owners should strongly consider starting it in their home state or in the state where their business is located. Starting an LLC in the home state is simply the most convenient route to follow. Business owners will be familiar with state laws, the government offices are easily accessible and they would likely know who to contact for information.
An additional reason to not form a foreign LLC is that business owners will likely have to pay additional fees, charges and will have much more paperwork to do.
The bottom line
To stay updated in the ever changing LLC formation world, businesses need to make sure they follow the latest news. By doing so, they will stay educated and will be able to use the evolving benefits.