Entrepreneur Magazine's Ultimate Book of Forming Corporations, LLCs, Partnerships & Sole Proprietorships by Michael Spadaccini
Spadaccini's writing is very readable but at the same time very comprehensive.
The IRS recognizes LLCs as having partnership tax treatment. The LLC can elect be taxed as a partnership or a corporation.
Multimember LLCs who elect to be taxed as a partnership, report income, losses and expenses on Form 1065.
A corporation may suffer from double taxation on profits, so that is why many will pay out the profits as salaries and bonuses, so that no profit is reported.
Partnerships
I have found that many people think that by declaring that they are not partners but are doing a joint venture, that the legal implications of a partnership are avoided. However Spadaccini writes that "partnerships are often formed accidentally through oral agreements." He states:
"A partnership is formed whenever two or more persons engage jointly in business activity to pursue profit"
William Bronchick states that if you do want to have a joint venture, then you can draft a "joint venture agreement", which is a partnership for a specific purpose.
See http://www.ilrg.com/forms/jointventure.html and http://www.lectlaw.com/forms/f101.htm
A limited partnership has two classes of partners. General partners who manage the business and are liable for debts, and limited partners who contribute capital. They latter have liability protection.
A limited liability partnership is usually made up of professionals such as lawyers or architects. LLP partners are only liable for their own actions.
http://www.suncorpfilings.com/default.aspx seems to be a very comprehensive site for setting up LLCs and corporations nationwide.
www.learnaboutlaw.com is Spadaccini's web site. It has some forms from this book.
He recommends http://www.bizfilings.com/ for setting up LLCs and corporations nationwide.
LLCs
States usually require out-of-state LLCs (foreign LLCs) to register and pay fees there. California is particularly strict. The same applies to corporations. In Florida it may be as little as $25.
LLCs are not the preferred entity for a business which has to raise large amounts of capital. Convert to a corporation if that is the case.
For an LLC, shareholders or partners are called "members". Shares are called "membership interests" and are measured in "units". There can be different types of units, e.g. common, preferred etc., just as with stock.
"Each member admitted to an LLC should execute an investment representation letter." This describes the member's qualifications and fitness and investment objectives.
If you start an LLC towards the end of the year, you may be required to file returns for the entire year. After January 1 may be preferrable.
Members and managers should not be appointed in the articles of organization if your state permits it. These are public documents and if privacy is an issue you may not want to identify anyone.
Use the secretary of state's model articles if possible. One major error in Spadaccini's book is the articles of organization supposedly in Appendix B are missing.
Operating Agreements are not filed with the state and remain confidential. Having one makes sure that the LLC is perceived as one and not just treated as a partnership, and also prevents having the state's default rules applied to it.
LLCs are not required to have annual meetings. FL does require an annual report, some states such as CA only need biennial reports.
S Corporations are taxed like partnerships. That is their essential difference to a C corp.
He also discusses DE and NV incorporation.
Always sign as an officer of the corporation or LLC, not as an individual, e.g. Joe Smith, President, XYZ LLC. William Bronchick also says that if you are requested to sign or guarantee something personally, try to get out of it by offering a larger deposit or that the guarantee expires after two years. Bank loans would usually require a personal signature and that you may have to swallow. He says for good corporate credit, become a member of Dun and Bradstreet (dandb.com).
Improper record keeping and observation of procedure and formalities can result in the corporate veil being pierced and "alter ego liability" of the members being asserted.
