Limited Liability Companies and Corporations provide a lot more legal protection than a Partnership or a Sole Proprietorship doing business as a fictitious business name (also known as a DBA).
However, in order for a Corporation to provide optimal protection, you have to make certain your annual filings are made with the Secretary of State’s Office and that annual meetings are held and documented properly.
For many small businesses, it is simply much easier to operate as an LLC. With a Limited Liability Company, there is limited liability for the owners and no required annual filings as with a Corporation. Limited Liability Companies can be taxed as a sole proprietorship, partnership, or S-Corporation.
In addition to consulting an attorney, you should also consult with a Certified Public Accountant before creating any business entity due to the individual tax implications involved.
Articles of Organization
A Limited Liability Company is formed by filing Articles of Organization with the Missouri Secretary of State. Section 347.039, RSMo. details the information that must be provided. A Limited Liability Company may designate one or more “managers” to operate its business or it may choose to operate under the direction of its members.
A Limited Liability Company which is “Manager Managed” means that there is a manager or multiple managers appointed to run the company. The Operating Agreement of the LLC would set forth what actions the manager could take without the consent of the owners. However, major decisions such as a sale of the company would continue to require the signature of all members of the company. Being Manager Managed can be more convenient for Limited Liability Companies operating in an industry where the signature of the LLC is required often and it would be tedious to have all members sign every contract or agreement of the company.
When an LLC is “Member Managed” it means that all owners (members) are running the operations of the company. Certain normal day-to-day tasks could be accomplished by only one member. However, all contracts or agreements would require the signature of all members or consent by an unavailable member giving the other members authority to sign.
The company’s Registered Agent is the official contact person for the LLC. They act as the legal representative for the company for service of process purposes when filing a lawsuit against the LLC.
An Operating Agreement setting forth the legal terms of operation for the company and establishing the names of the owners (owners of an LLC are called members) and their ownership percentages. Many business owners forget that they need an Operating Agreement and that it is the only way to verify who owns the Limited Liability Company.
Federal Employer Identification Number (EIN)
If the LLC is not owned as a sole proprietorship operating under the owner’s individual Social Security number, then a Federal Employer Identification Number (EIN) would need to be obtained. It is usually best to have a CPA apply for the EIN to ensure that you are making the best decisions concerning how the company should be taxed.
If you have questions about these services or would like to schedule a consultation with our attorneys, please give us a call today.