LLC explained simply – Forming an LLC (Limited Liability Company) is a popular option for entrepreneurs in the USA who want to limit their liability and benefit from tax advantages. Learn more here about the formation of an LLC, its advantages and disadvantages and the tax aspects of this form of company. Setting up a US company? Learn more about US legal forms here.
The formation of an LLC is a legal form of company that is very common in the USA. It offers many advantages, especially for small businesses and the self-employed. When forming an LLC, certain steps must be followed, including
Articles of association: Formation of the LLC
The formation of an LLC requires an operating agreement that sets out the basic rules and structure of the company. This agreement may contain specific clauses on management and profit distribution.
Minimum capital: Variable
In the USA, there is no standard minimum capital requirement for the formation of an LLC, but some states require a minimum capital contribution, which may vary. It is advisable to find out about the specific requirements of the respective state.
Entry and registration
The LLC must be registered with the relevant state office. This includes the submission of formation documents and the payment of fees. The exact requirements may vary from state to state.
Foundation costs in detail
The cost of forming an LLC can vary from state to state. As a rule, you should expect the following costs:
Foundation fees: between 50 and 500 USD
Notary fees: if required
Annual reporting costs: between 50 and 800 USD, depending on the state
For the first two to ten properties, an LLC (see GmbH in Germany) is best suited to minimize liability risks and at the same time take advantage of tax benefits. The LLC limits the personal liability of the owners, while profits and losses are attributed directly to the shareholders, which avoids double taxation. In comparison, a Limited Partnership (see KG) offers more flexibility in terms of passive participation, but the general partner bears full liability. A general partnership (see OHG) involves higher risks due to unlimited liability.
US-Firmengründung speziell für Tax-Lien-Investoren
US-Firmengründung speziell für Tax-Lien-Investoren. Dieses exklusive Paket wurde speziell für deutschsprachige Tax-Lien-Investoren entwickelt und enthält alles Wichtige, was ein Investor benötigt, um seine Tax-Lien-Investments erfolgreich umzusetzen:
Here are the main advantages and disadvantages of an LLC at a glance:
3 advantages at a glance
Limited liability
Flexibility in taxation
Fewer formal requirements
The main advantages of an LLC are limited liability, which means that the owners’ personal assets are protected in the event of debt or liability claims. LLCs offer flexibility in taxation as they can be taxed as a sole proprietorship, partnership or corporation. In addition, the formal requirements are lower compared to other forms of business.
3 “Disadvantages” at a glance
Formation costs
Accounting complexity
Regulatory requirements
Forming and managing an LLC can be costly, including set-up fees and annual costs. In addition, bookkeeping requires more effort than with a sole proprietorship. Regulatory requirements can also vary by state.
LLCs are generally subject to pass-through taxation, which means that the profits and losses of the LLC are passed through directly to the owners and taxed on their personal tax returns. More on this topic here: Taxes USA.
Important tax aspects
Federal income tax
Federal taxes
Self-employment tax
LLCs must pay tax on their profits, and federal income tax and state taxes may vary by location. Self-employment tax may also apply to owners who are actively engaged in the LLC.
Save taxes with the LLC
Using an LLC can help you save on taxes, as you can deduct certain expenses and benefit from tax breaks. However, careful accounting and tax planning are essential.
FAQ about the LLC
How much does it cost to set up an LLC?
The start-up costs vary depending on the state, but are generally between USD 50 and USD 500.
Can I form an LLC on my own?
Yes, in many states it is possible to form an LLC as an individual.
LLC formation for entrepreneurs
Forming an LLC can be a smart decision, especially when you consider the benefits of limited liability and tax flexibility.
LLCs offer protection for your personal assets and allow you to benefit from tax advantages. This makes them an attractive choice for many entrepreneurs.
Conclusion
The LLC is a versatile business form that can offer significant benefits to many entrepreneurs in the US. If you are thinking about forming an LLC, it is advisable to learn about the specific requirements of your state and possibly consult a professional to make the best decisions for your business.
Legal forms USA: Foundation & real estate
What types of company are there? If you want to set up your first US company, choosing the legal form is one of the first steps in the company formation process. Whether you want to set up a special real estate company or a start-up, we have summarized all types of companies in the USA for you here – with extra tips for real estate investments, of course.
For the first two to ten properties, an LLC (see GmbH in Germany) is best suited to minimize liability risks and at the same time take advantage of tax benefits. The LLC limits the personal liability of the owners, while profits and losses are attributed directly to the shareholders, which avoids double taxation. In comparison, a Limited Partnership (see KG) offers more flexibility in terms of passive participation, but the general partner bears full liability. A 
