The operating agreement details how your business will be managed as well as the rights and responsibilities of its members. It also details each member's voting power and everyone's portion of profits and losses. You don't have to file your operating agreement with any government or legal agency.
However, if your LLC has more than one owner, it's a smart move to create this agreement in order to cut down on any business conflicts that may arise in the future. Your state may require you to publish a public notice about your intention to start an LLC. Usually, you can do this in your local newspaper. You should open a new bank account under your LLC's name to ensure separation of personal and business funds. LLCs enjoy certain benefits that sole proprietorships don't, but the legal separation of you and your business is one of the biggest.
Because it's inexpensive and simple to form an LLC, you might consider changing to this business structure for your own protection. Some of the rights of an LLC include owning property, opening bank accounts, owning a business, and selling property.
As a sole proprietorship, you leave yourself vulnerable to a lawsuit as the filing party can sue you personally. Furthermore, there are several tax advantages to filing as an LLC compared to sole proprietorships, and they allow you to make more choices about how you pay taxes.
Multiple people can be the owners or "members" of an LLC. Sole proprietorships are, by definition, limited to a single owner. However, if you are the only owner of your business but still want the protections offered by a corporation, you can file as a single-member LLC. Sole proprietorships are very easy to create, since they are simply the same legal entity as their owner.
Forming LLCs are moderately more involved but are affordable in most states. Don't forget that when you are a sole proprietorship rather than an LLC, you are the same entity as your business. Because an LLC is a separate legal entity, one does generally need to update a new employer identification number when starting a new LLC.
If you would like further assistance or have additional questions, my company CorpNet. I have a property management company that is current a sole proprietorship. Hi Rosa — thank you for your question. Are you referring to the employer tax ID number perhaps? Feel free to email me directly at info at corpnet dot com. All rights reserved. Share on Flipboard. Email this Article. Nellie Akalp. Does your company need to designate a registered agent? Find out how much it costs to have a registered agent and what services may be provided.
Can you choose your wife or husband? Legally, the answer is often yes, but your spouse may not be the best choice. Find out why. An LLC can help protect your personal assets, but to maximize your personal protection there are a few more steps you'll need to take. Ready to start your LLC? Contents 3 min read Ready to start your LLC?
About the Author Michelle Kaminsky, J. Related Topics. Facebook Twitter. This portion of the site is for informational purposes only.
The content is not legal advice. The statements and opinions are the expression of the author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.
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