The 1, 2, 3’s of LLCs

1. What is an LLC?

A Limited Liability Company or “LLC” means an entity formed or existing under Alabama Limited Liability Company Law of 2014, and more specifically Sections 10A-5A, et seq. In simple language, an LLC is a business structure whereby the members of the company cannot be held personally liable for the company’s debts or liabilities. LLCs are basically hybrid entities that combine the best characteristics of a corporation and a partnership or sole proprietorship. Alabama recognizes several different types of businesses, for example: Corporation; Limited Liability Company “LLC”; Limited Partnership “LP”; General Partnership “GP”; Limited Liability Partnership “LLP”; Limited Liability Limited Partnership “LLLP”; and Professional Associations. Not to mention, the various non-for-profit business and charitable entities.

2. Who should form an LLC?

Forming a Limited Liability Company or “LLC” is perfect for any business owner or partnership that wishes to separate their personal assets and interests from that of their business assets and interests. If properly formed and managed, a business owner’s personal assets are shielded from liabilities incurred by the business or LLC. Generally, this means that business debts owed by the business, and other claims on the business, including liens and lawsuits, are limited to the assets of the business itself. For example, if you own a lawn maintenance business, construction business, technical or household service provider, retail establishment, or a courier type business you should form a legal business entity like an LLC. Secondly, any type business that hires employees, operates vehicles or equipment, performs services on customer’s residences or commercial property, or performs services on or to customer owned assets or personal property should form a legal business entity like an LLC.

3. How do I form an LLC?

In Alabama it is initially a four-part process:

  1. Reserve the Company name with the Alabama Secretary of State.
  2. Complete and file a Certificate of Formation with the Alabama Secretary of State.
  3. Record the Certificate of Formation and Name Reservation with your local County’s Probate Office.
  4. Apply for a Federal Tax Identification Number, also known as a “95 Number”, “E.I.N. Number,” or “Tax I.D. Number,” all refer to the nine digit number issued by the IRS.

Call me to schedule your no-cost consultation to discuss forming a business entity in Alabama, business entity options, or if you were originally formed as a partnership or corporation and would like to learn about converting to an LLC.

John C. Saylor, Attorney at Law

www.johnsaylorlaw.com

john@johnsaylorlaw.com

256-740-3131

323 S. Walnut St, Florence, AL 35630

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