Limited Liability Companies

The members of the limited liability company are the owners. Usually single-member LLCs would be member-managed, but on the public documents in almost every state you have to list the members or managers. So you might want to be member-managed and list just the manager on public documents, in some cases, even if you’re a single-member LLC.

Managers for a multi-member limited liability company can be an important distinction. Let’s say 10 different families invest $1,000 each in a ski-in, ski-out vacation rental property. Each family would make up the members, but none of them live at the ski resort, so they might hire a property manager to rent it out when they aren’t using it and maintain it. It would be smart to designate one or two of the members and the property manager as the managers of the LLC for day-to-day operations of the vacation rental.

Members can always vote out the manager(s) of the limited liability company.

The best state for an LLC formation is almost always the state where you live, particularly if you’re doing business in your home state.

If you’re doing things on the internet or using the company as a holding company for assets, forming an LLC in a tax-friendly state like South Dakota, Wyoming, Nevada, Montana, or Delaware might bring some benefits, but we’d recommend consulting with a tax professional before going that route.

Forming a company in a tax-free state like Wyoming usually won’t be of benefit to you if you live in a normal taxing state like New Mexico or anywhere with a normal tax burden. Living in a place like California, New York, New Jersey, or any location with high fees and high taxes, can present some nice options of forming an LLC out of state and trying to run some of the income through it that way. Electing the LLC as a C corporation keeps the money from getting down onto you personally where you might need to pay a high personal income tax rate in a highly taxed state.

At the end of the day, it’s always simplest and sometimes cheapest, in the long run, to incorporate or form an LLC in your home state. We’ll be glad to help you no matter what you decide.

The major differences between an LLC and a corporation boil down to ownership, management, and taxes. LLCs are owned by members. Members can manage directly or appoint managers, giving LLCs the flexibility of operating like partnerships or corporations. Corporations (except for non-stock corporations like nonprofits) are owned by shareholders. Shareholders elect a board of directors to make business decisions. The board of directors appoints officers to execute those decisions.

When it comes to taxes, LLCs are taxed as partnerships unless they choose to be taxed as S-corps or C-corps. Corporations are taxed as C-corps unless they choose to be taxed as S-corps. Corporations can’t be taxed as partnerships, meaning LLCs have greater tax flexibility.

Learn more about these differences on our LLC vs Corporation page.

Typically around $100. Each state sets its own fees to file LLC articles of organization. This tends to be flat filing fee, ranging from $40 (Kentucky) to $500 (Massachusetts). Tennessee, however, bases their LLC formation fee on how many members your business has, so their fee can be anywhere from $300 to $3,000.

At Northwest, we can form your LLC for just $39 plus state fees, a total that includes one year of registered agent service.

No, but a sole proprietor can become an LLC. A sole properietorship and an LLC are two different kinds of business structures. If you’re a solo business owner that has never registered with the state to form a business entity, you have a sole proprietorship.

A sole proprietor can easily become an LLC by filing articles of organization with the state. An LLC typically has increased reporting requirements but receives benefits that are out-of-reach to sole proprietors, such as limited liability and tax flexibility.

Yes, an LLC can be an S-corp. An LLC is a business entity created by filing articles of organization with the state. An S-corp is simply an IRS tax classification that LLCs (and corporations) can choose if they meet the requirements. In many cases, an S-corp election can save LLCs money on employment taxes.

Learn more on our S-corp vs LLC page.

Yes, forming an LLC can help you reduce your public footprint. Living publicly—and giving away your data to be sold and resold—has been normalized. It’s possible to take back control of your own information in a number of ways, and in some cases, forming an LLC can help. Note that this will require taking certain steps, like hiring a registered agent service, to keep your personal information off public filings.

Learn more about how to Live Privately with an LLC.

There are several different types of LLCs that can vary depending on how you set up your business, and the state and industry in which you operate. Some common types of LLCs include:

• Single Member LLC (with only one owner)

• Professional LLCs (for state-licensed professions, like doctors and lawyers)

• Series LLC (for LLCs needing separate liability protection for different parts of their business)

There are also LLCs taxed as S-corps and C-corps. LLC management is another way to categorize LLCs. There are member-managed LLCs and manager-managed LLCs. It’s even possible to form a nonprofit LLC in a handful of states.

Yes and no. For an LLC with default tax classification, the company itself doesn’t pay federal taxes. Instead, profits are distributed to owners (members) who then report those earnings on their personal filings. This is known as pass-through taxation.

However, LLCs might be required to pay various state taxes, such as franchise taxes. LLCs can also elect to be taxed as corporations—in which case, the LLC itself may owe taxes.

For a deep dive into LLC taxes, see our LLC Taxes page.

Yes, you can file articles to form your LLC yourself. However, there are a few downsides to doing so.

First, any information you list in your articles becomes a part of the public record—permanently. There’s no going back and erasing your home address or other personal info once it’s out there. When you file yourself, you are the “organizer” of your LLC and usually need to list your name and address. In most states, you can avoid putting your personal address (and in a few states, even your name) on this public doc by hiring a service like Northwest to be your registered agent and organizer.

Second, when filing on your own, it’s easy to make expensive mistakes that can cause your filing to be rejected or that can require pricey amendments down the road. At Northwest, we form LLCs across the nation every day. We know the ins and outs of every state from Alabama to Wyoming.

• Maybe you prefer to keep your personal address off your public filings.

• Maybe you need a registered agent, operating agreement, business address and mail forwarding—all of which is included with our LLC formation.

• Maybe you have a lot of business questions our Corporate Guides® can answer for you.

• Maybe you’re tired of companies selling your data.

• Or maybe you just don’t want to have to file more paperwork.

Whatever your reasons are, Northwest is here to help you start your LLC the right way.