How to start a business entity in USA?
Correct entity can save you from lot of troubles in the future
Do you know the relevant details about starting a business in the USA? It is always a good idea to separate yourself from the business entity to protect yourself and your family in the unfortunate circumstances.
Disclaimer:
I am not a licensed CPA or Lawyer. This post is for informational purposes only, and it should not be treated as legal advice. You should consult your Lawyer and CPA before setting up your LLC to best serve your objective and tax scenario.
Business Entities
There are a few different types of business entities you can set up based on your situation and business needs. The most obvious ones are as follows:
Sole Proprietorship
Limited Partnership (LP)
Limited Liability Partnership (LLP)
Limited Liability Company (LLC)
S-Corp
C-Corp
Two of the most common business entities are a Sole Proprietorship and an LLC for most small businesses. I use LLC for my real estate asset needs in most cases. I am sharing different steps about LLC in this post, which might be helpful for you as well if you want to go this route.
LLC Setup Process
There are a few different steps I went through to set up my own LLC. Here are those for your reference:
Defining LLC structure (Consult with Lawyer & CPA on what is the right setup for you)
Register your LLC with the appropriate state (check asset protection)
Find an appropriate name and do a name search on the state website
Decide which mailing address and registered agent address you will use
Finally, register your LLC with the state (online/law firm)
Get an EIN from the IRS after your LLC gets approved in the state
Draft your LLC Operating agreement (preferably by a Lawyer) and get signatures from all members
Set up your business checking account
Decide how you will do the LLC accounting, and start working on your business (find customers/clients or start looking for rental properties)
Asset Protection
Different states in the USA have certain advantages/disadvantages for setting up an LLC. The following states have charging order protection for single-member LLCs:
Wyoming
Delaware
Nevada
Alaska
South Dakota
A few states don’t regulate to disclosure of LLC members and managers (Anonymous LLC):
Wyoming
Delaware
New Mexico
A few things have changed in the last couple of years due to the FinCen filing requirement of Beneficial Ownership Information. Please research here at fincen site about the latest update if you need to provide ownership information or not.
Important things
LLC can help in different scenarios during legal disputes, but at the same time, you should know about the shortcomings too:
You can lose all the assets inside a single LLC in case of a Lawsuit
Typically LLC protects if it is set up correctly
Don’t mingle funds in personal and business accounts
Follow the IRS guidelines based on your LLC setup (pass-through entity/tax filing)
Get professional advice from a CPA/lawyer who is experienced in real estate or a specific small business you are trying to set up
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