What You Need to Know Before You Set Up an LLC


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I recently received a question from a reader at USTaxAid regarding LLCs (limited liability company).

The question itself is simple:

“Is there an online way to set up LLC’s easily without paying gobs of money to lawyers?”

The answer is perhaps not so simple. There are a number of things you need to consider before you form an LLC. Here are the top 4 for me:

  • Will it be member-managed or manager-managed?
  • In what state will you form the LLC?
  • Will there just be one member (owner)?

If multiple, make sure you have a solid partnership agreement including a Buy-Sell Agreement.

  • What tax structure will you use?

I don’t personally recommend using an online company. The formation and maintenance of a business structure is important. You form companies to provide asset protection and tax benefits. Those are pretty important purposes and, in my opinion, it’s too important to try to cut corners. However, if you’re comfortable that you know how to answer all of the important legal questions, you’ll find popular online sites like LegalZoom who can help you form the LLC. Just make sure you know the answers to the important questions up front and be aware that they are just serving to document and file what you want. They won’t give you advice.



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