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A limited liability company, also known as an LLC, is a legal business entity made to protect its owners from business debts, claims and personal liability. Owners of an LLC are called members. And just as in a partnership, a limited liability company is also a “pass-through” tax entity where the net income of the business is passed through the business and directly to the members of the LLC.

The owners/members of the limited liability company are then responsible for reporting and filing their own individual earnings on their personal tax returns just as they would within a partnership. Forming an LLC can become a little more complicated than forming a normal partnership as duties and profit sharing can differ from one member to the next.
Yet all LLC owners can become protected from personal liability and for business debts as well. For example, lenders, landlords and suppliers can not go after personal property belonging to the LLC owners. Yet they can legally go after all assets of the LLC in order to pay off outstanding debts and claims. And the owners will most likely lose their investments which they put into the business as well.
Furthermore, an LLC member/owner can be held liable if the owner defaults on a loan, fails to pay taxes or participates in any fraudulent or illegal activities.
Protecting your personal assets

As an LLC owner, you can protect yourself and your personal assets by obtaining a good liability insurance policy. Even if your limited liability protection is ignored by the courts, a good liability insurance policy can protect your personal assets.

Furthermore, a good liability insurance policy can protect the assets of the LLC from a lawsuit as well. However, most policies will not protect the LLC from unpaid business debts. This is an obligation that must be fulfilled by the members of the LLC.

Taxes and LLC’s

An LLC is not considered a separate taxable entity from its owners. Instead, all net income is passed through the business and directly to the owners of the LLC. This is called a ‘pass-through entity’ just as in a partnership.

Once net income has been passed on to the LLC members, those members must then report their share of the profits on their personal income tax returns. And just as in a partnership, each LLC owner must make estimated quarterly tax payments to the IRS each year.

The LLC must fill out and file IRS Form 1065 each year with the IRS. And this form will clearly state all profits earned by the individual LLC owner.

The IRS Form 1065 is then reviewed by the IRS in order to ensure that all LLC owners are reporting their income earnings correctly and regularly.
Managing an LLC

Many times, LLC owners will have an equal share in duties, responsibilities and in managing the LLC business. And these agreements and arrangements are known as a "member management".

When one LLC owner or more, takes on responsibility for managing the LLC then this becomes known as a "manager management" position.

Yet non-managing owners such as investors for example, have no part in managing the business yet continue to receive their share of the profits from the LLC.

The only members who are allowed to make management decisions are those in the position of “manager management”. And it’s the management managers that become and act as the main agents of the LLC business.
Forming a Limited Liability Company

To form a Limited Liability Company you must file the "articles of organization" with the LLC department of the Department of Corporations for your state government.

It should also be noted that you can actually form an LLC with just one member as well. And forming an LLC is as simple as requesting and filling out the LLC form with your name, address and the contact information of one or all members who are going to be owners in the LLC.

Furthermore, along with filing the articles of organization, it is important to create a clearly written business management agreement stating how the business will be run and operated as well as the positions and responsibilities of each member.

Such an agreement must make clear the duties of all members and how the profits will be shared as well. And just as in a partnership, an LLC can be dissolved if one of its members decides to leave or walk away.

The remaining members must then fulfill all responsibilities and obligations of the LLC business. And such responsibilities can include paying off business debts and dividing and sharing profits amongst the remaining members of the LLC.

This is why a “buyout agreement” should always be made when forming the actual LLC and filing the articles of organization. And this agreement should clearly state what happens to the assets and profits of the LLC owner should that member decide to leave or sell their share of the LLC business.

When forming an LLC with one or more members, you should always create a clearly written agreement stating all conditions and duties for all members of the LLC in order to avoid any conflict or confusion should any problems arise. And in doing so, an LLC can run smoothly and become profitable as well. 
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> 1. Books
Main Article Index Page
How to Succeed in Your Online Store Business
How to Start Your Online Store Business
How to Choose Your Niche Market
How to Create an Effective Business Name
Check for Domain Name Availability
How to Register Your Business Name
Should You Use a PO Box or Home Address
How to Choose the Right Business Entity for You
Sole Proprietorships Explained
Corporations Explained
Partnerships Explained
Limited Liability Companies Explained
Incorporate Your Business Online
How to Obtain Your Sales Tax License
The Best Selling Products Online (Intro)
1. Books
2. Computers, Computer Hardware
NEW:Start a Computer Reseller Business Online
3. Computer Software
4. Consumer Electronics
5. Apparel, Clothing
6. Toys/Video Games
7. Videos DVD’s
8. Health and Beauty
9. Music
10. Jewelry
11. Office Supplies
12. Linens/Home Décor
13. Flowers
14. Sporting Goods
15. Footwear, Shoes
16. Small Appliances
17. Tools and Garden
18. Gifts
About Distribution
Choosing the Right Distributors
How to Get Signed-Up With DropShip Distributors
Books Distributors, DropShippers, Wholesalers
Computers, Hardware, Software DropShippers
Apparel, Clothing Distributors, DropShippers
Toys/Video Games DropShippers, Wholesalers
Video DVD  DropShippers, Wholesalers
Health and Beauty Distributors, DropShippers
Consumer Electronics DropShippers
Music Distributors, DropShippers, Wholesalers
Jewelry Distributors, DropShippers, Wholesalers
Office Supply Distributors, DropShippers
Linens/Home Décor DropShippers, Wholesalers
Flowers Distributors, DropShippers, Wholesalers
Sporting Goods Distributors, DropShippers
Footwear, Shoes Distributors, DropShippers
Small Appliances DropShippers, Wholesalers
Tools and Garden DropShippers, Wholesalers
Gifts Distributors, DropShippers, Wholesalers
How to Find More DropShippers, Wholesalers
How to Open Your Online Store
How to Build Your Own Online Store
How to Build Effective Product WebPages
Building Your eStore with Website Templates
Designing, Planning and Organizing Your eStore
Implementing Graphic Elements
How to Create Your Own Company Logo
Create Search Engine Optimized Product Pages
How to Create a Content Rich Website
Choosing Your Web Host Provider
Create a Search Engine Optimized Domain Name
Check for Domain Name Availability
Top Web Building Software Programs
Top 10 Web Host Providers
Top 10 Complete eCommerce Solutions
Top Website Developers
All About Shopping Carts
All About Payment Processing
All About Merchant Accounts
Using PayPal as a Payment Processing Solution
More Merchant Account Providers
All Merchant Account Providers
Setting Your Prices
Setting Shipping Charges
Maintaining Your Online Store
Your Internet Marketing Master Plan
All about Search Engines
The Top Search Engines
Search Engine Optimization Guide Pt.1
Search Engine Optimization Guide Pt.2
All about Building and Exchanging Links
Purchasing Text Link Ads
All about Press Release Marketing
All about Pay-Per-Click Marketing
All about Discussion Forum Marketing
All about Article Marketing
All about Email Marketing
All about Banner Advertising
How Offering Free Shipping Can Boost Sales
All about 800 Toll Free Numbers
How to Beat the Competition
How to Run an Online Store Business
Dealing with Customers
How to Minimize Interaction with Customers
How to Deal with Customers via Email
How to Take and Place Orders
Paying for Products with Your Customers’ Money
How to Collect Sales Tax for Internet Sales
Avoiding Credit Card Fraud
How to Ship International and Overseas
How You Get Paid Each and Every Day
Dealing with Product Returns and Exchanges
Sample Return Policy and Procedures
Sample Privacy Policy
Sample Terms and Conditions Policy
Internet Business Resources
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