Posted by Kevin/Ct on 12/12/08 5:57am
Msg #271784

LLC Formation

For those of you that are considering forming an LLC to transact business...do not make the mistake of going the cheap route. You get what you pay for.

In order to form an LLC in many if not all states it is simply a matter of filing a form (Articles of Organization) with the Secretary of State's Office. That may create the LLC, but it does not offer the members of the LLC the protection they may need from internal conflict. While the state statutes usually provide well for protection of the LLC membership from external liability to third party suits, these statutes may or may not provide for the protection of a dissatified member of the LLC who wishes to exit the LLC. Connecticut is one of the states which offers little statutory protection for disenchanted members.

State statutes will usually defer to the operating agreement of the LLC. Without an operating agreement the LLC members are left to whatever the statute may or may not offer for protection. Without the operating agreement the unhappy LLC member is at the mercy of the majority members of the LLC, and may have difficulty obtaining a fair settlement when leaving the LLC. I recently heard of someone who finds herself involved in such a situation.

Setting up the LLC is a one time expense. Do it the right way to avoid more expensive future problems. Consult with both an accountant and an attorney to answer all of your questions on taxes and liability (both external and internal). Make certain that in addition to your articles of organization and membership certificates you have an operating agreement drafted that addresses both external liability and internal discord.

Reply by BobbiCT on 12/12/08 7:08am
Msg #271787

LLC Formation and COSTS

Pay attention to Kevin's advice. It is well worth the initial expense. Depending on your state, the annual "cost of existence" and if acting as a sole proprietor may not be the "protection" you are looking for. Remember, there is little to protect you when you are acting in your Public Official capacity, which is what you are when performing a notarization.

Particularly consult with an accountant about the "basic annual costs of dba an LLC."
For example, many individuals in CT did the DIY sole proprietor LLC filing with the CT Secretary of State - only $60. Months or years later they get the bill for past due taxes from the Dept. of Revenue Services. They've been hit with the $250 ANNUAL BET tax; CT's annual Business Entity Tax, which in my opinion is just a tax to exist in CT because the state needed to increase revenues.

Reply by Art_PA on 12/12/08 8:28am
Msg #271792

Excellent advice.

I recently reviewed an LLC Agreement for clients who bought it from the company which advertises heavily on TV and on national talk shows. It was awful and did not address their issues and did not fit the business they were in. These generic agreements are very basic and since the "clients" do not know what they are really doing or what they really need, or what their needs really are, or how to design the document to deal with members leaving or new members being admitted... There are too many issues to list here.

Kevin alludes to issues which arise if a member leaves. The cost of dealing with this event when a member leaves either for personal reasons, by retirement, disability, or death if not carefully addressed in the agreement, will be many times the cost of doing it right first.

Cheap or do it yourself legal services are often the most costly. This goes for wills and trusts also.

Reply by John_NorCal on 12/12/08 2:38pm
Msg #271825

Very good points made here. California LLC's.....

have an annual fee of $800.00. On the tax side you have to decide whether you want to be taxed as a corporation or as a partnership (which is what an LLC technically is), best advice is what has been given --- see a competent attorney and an accountant.