The difference between sole proprietorships and Limited Liability Companies (LLCs) is important because it determines whether you are protected against lawsuits. If you operate as a sole proprietorship, you are personally liable for any debts incurred during the course of doing business. In contrast, an LLC protects its members from personal liability.
If you are considering forming an LLC, here are some things to consider:
1. You must file articles of organization with the Secretary of State within 30 days of formation.
2. When you form an LLC, you become the manager of the company. As such, you are responsible for managing the company’s finances and operations.
3. A member of an LLC cannot sue another member unless he or she is injured by fraud or criminal activity.
4. Members of an LLC are entitled to vote on major decisions affecting the company.
5. A member of an S corporation can be held personally liable for unpaid taxes owed by the company.
New Hampshire: What benefits come with an S Corp vs. LLC
The benefits of forming an LLC include protection against personal liability, pass-through taxation, easier formation, and less paperwork. This article explains how New Hampshire residents can benefit from forming an LLC.
Steps to change sole proprietorship to LLC in New Hampshire
An LLC is a limited liability corporation. This type of entity provides protection from personal liability for those involved in running a business. If you are thinking about incorporating your business, there are several steps you must take in order to make the transition. You will want to consult with a lawyer in order to ensure that you follow the correct procedures.
The first step is to file articles of organization with the Secretary of State’s office. Once filed, the Secretary of State will issue an identification number to your business. In addition to filing articles of organization, you will also need to register your business name with the Secretary of State. Next, you will need to file a certificate of good standing with the Secretary of State.
Once you have completed the above steps, you will become eligible to apply for tax ID numbers. These numbers will help your business receive sales taxes. Sales taxes are collected by the state and are based on the location where the sale takes place. For example, if you sell products online, you will collect sales taxes from customers in the state where you reside.
Before switching from sole proprietorship (SP) to an LLC, make sure you know whether anyone else owns your company name. You want to avoid getting into a legal battle over your business name. If there are no registered trademarks associated with your name, you’re good to go. However, if someone else already holds a federal trademark registration for your name, you’ll want to change it.
Be careful about using restricted words in your business name
Some states prohibit businesses from using certain words in their names. For example, California prohibits companies from using “disability,” “handicap,” “service animal,” “veteran,” “service dog,” “sexual orientation,” “transgender,” “religious,” “ethnic,” “racial,” “political,” “progressive,” “environmental,” “union,” “labor,” “occupational,” “family,” “women,” “men,” “parenting,” “childcare,” “youth,” “senior,” “retirement,” “home,” “health,” “fitness,” “wellness,” “nutrition,” “meditation,” “religion,” “spirituality,” “self,” “autism,” “bipolar disorder,” “depression,” “mental illness,” “psychosis,” “schizophrenia,” “suicide,” “addiction,” “alcoholism,” “substance abuse,” “drug addiction,” “cocaine,” “methamphetamine,” “heroin,” “opioid,” “prescription drug,” “pain management,” “medical marijuana,” “recreational marijuana,” “legalization,” “decriminalize,” “criminal justice reform,” “prison abolition,” “incarceration,” “death penalty,” “capital punishment,” “execution,” “lethal injection,” “life imprisonment,” “juvenile detention center,” “detention facility,” “jail,” “law enforcement,” “police officer,” “arrest,” “arrest warrant,” “warrant,” “search warrant,” “seizure,” “confiscate,” “forfeit,” “evict,” “foreclosure,” “bankruptcy,” “insolvency,” “asset forfeiture,”
2. File articles of organization
Fill out the articles of organization form to set up an LLC. This document needs to be filed with the state where you want to register the LLC. Many states charge between $50 and $200 to fill out the articles of organization. Some states don’t even offer filing fees. If there are no filing fees, it usually doesn’t matter much whether you pay $100 or $1,000. However, some states do charge filing fees. For example, California charges $300 for a single-person LLC, and $500 for a multi-person LLC.
In most states, the articles of organization must include the name of the LLC, its address, and the names and addresses of the owners. You’ll also need to provide information about the purpose of the LLC.
You’ll need to find someone to serve as the registered agent. A registered representative receives legal notices and other documents sent to the LLC. They’re responsible for receiving and forwarding those documents to the appropriate parties.
The registered agent must be a natural person. An individual cannot act as both the registered agent and one of the members.
3. Write an LLC operating agreement
An operating agreement is one of the most important documents you’ll write while starting a new business. If you’re running a small business with just yourself as the owner, it’s easy to overlook this document because it doesn’t seem like something you’d ever need. But having a good operating agreement in place can help protect you and your partners from legal issues.
You might think it’s enough to draft a simple partnership agreement. While that’s true, it’s also very common for entrepreneurs to form a limited liability company (LLC) without a written operating agreement. This isn’t necessarily a problem—but it does mean that you won’t know what the rules are for running the company. And since every state requires some sort of operating agreement, you could find yourself in trouble later if you don’t follow the law.
In addition, many states require that you file certain forms and pay certain fees within a specific timeframe. For example, California requires that you file Articles of Organization within three months of forming the company. Failure to do so can lead to fines.
So, even though you probably aren’t planning on expanding your business anytime soon, it pays to have a solid operating agreement in place. Here’s why:
1. Protecting Yourself From Legal Issues
If you start a business with someone else, you want to ensure they understand their role in the company. You don’t want to end up in court over a dispute between you and your partner. An operating agreement can serve as a way to clarify those roles.
For instance, let’s say you’ve got a friend named Joe who wants to join your startup. He says he wants 50% ownership in exchange for his work. What happens if things go south? Will he walk away with half of whatever money you make? Or will he get nothing?
4. Announce your LLC
Most states require an LLC to post a notice about its formation in the newspaper where it filed the papers. You must include the name of the LLC, the date you formed it, the owners’ names, and the registered office’s address. If you are filing online, make sure you check the box indicating that you want the information published.
You don’t have to wait until the end of the month to do this. Many states allow you to submit the form electronically within 14 days of forming the LLC. Check with your state’s Secretary of State’s office to find out what forms you need to fill out and how long you have to complete them.
If you fail to comply with the law, you could face fines and even jail time.
5. Apply for a new bank account
When starting a small business, it is important to set up separate business and personal accounts. This way, you can easily manage your finances and avoid spending too much money on things like credit cards and loans. You can use different types of banks depending on what type of business you run. Some banks offer better business rates while others provide special features such as online banking.
You can apply for a new bank account once you have opened one. You can apply for a business account if you already have a bank account. Once you have applied for a new bank account, you will receive an application form and information about completing the process. Make sure you complete the forms and submit them within 30 days.
Once you have received approval from the bank, you will be able to access your business account online. You can view your balance, make transfers, pay bills, and even withdraw cash. You can also link your business account to your main account. This allows you to transfer funds directly from your business account to your personal account.
A lot of people do not realize that having a business account is beneficial because it helps you keep track of your expenses. When you open a business account, you will be given a receipt book where you can write down every transaction you make. You can also download expense reports and generate monthly statements.
Business accounts usually come with additional benefits. For example, some banks allow you to deposit checks electronically. You can also take advantage of free bill payment options. Many banks offer discounts on ATM fees, mobile phone plans, and internet services.
6. Apply for an EIN
You must file Form SS4 (Employer Identification Number) with the IRS to obtain an EIN. If you already have one, it will continue to work until December 31, 2017. Why do you need an EIN? Here are some common reasons people ask us about getting a new one.
1. To open a bank account
2. To receive unemployment benefits
3. To change your name
4. To start a business
5. For tax purposes
6. To obtain a Social Security card
7. Apply for business licenses and permits
Businesses incorporated under the laws of the District of Columbia must file articles of incorporation with the Secretary of State. These documents include information about the business’s name, the address where it will do business and the names of the directors. In addition, businesses incorporated under the laws of Virginia require filing articles of organization with the Commonwealth Corporation Commission. These filings include similar information about the business name, address, and director information.
Lawyers or accountants usually do incorporation. If you don’t know how to incorporate it, ask your accountant or lawyer for help. You’ll likely pay fees ranging from $150 to $300 per person for incorporation.
The IRS does allow certain types of small businesses to use the EIN rather than a Social Security Number. However, there are restrictions on how many employees you can have, whether you’re allowed to deduct expenses, etc. For more info, check out our guide on “How to Use Your Employer Identification Number.”
Frequently Asked Questions
How much does a New Hampshire Limited Liability Company amendment cost?
To file an amendment to your New Hampshire LLCs’ certificate of formation, you must pay a $35 fee.
How to Dissolve an LLC in New Hampshire
If at any point in the near future you no longer wish continue conducting business as a limited liability corporation, it is important to dissolve your entity formally. You must file articles of dissolution within 30 days of dissolving your LLC. This is true whether you want to end your LLC because you sold your business or changed your mind about being a sole proprietorship.
You must close your business tax account(s) to dissolve your LLC. Your accountant or bookkeeper will know how to do this. Once you have closed your business account(s), you must file Articles of Dissolution with the Secretary of State.
The process is straightforward. For example, if you dissolved your LLC on July 31st, you would file Articles of Dissolution on August 31st. However, you cannot file Articles of Dissolution until you have closed your business tax accounts. In addition, you cannot file Articles until you have filed federal taxes for the current tax year. Therefore, you should wait until September 15th to file Articles of Dissolution.
Once you have filed your Articles of Dissolution, you are done. Your LLC is now dissolved.
Can a DBA get an EIN or Tax ID?
A common question we receive relates to whether a database administrator (DBA) needs to obtain an Employer Identification Number (EIN). A DBA isn’t required to have an EIN because DBA’s are not considered businesses. Instead, a business entity must obtain an EIN if it wants to file tax returns and pay taxes. If a business does not want to file tax returns and/or pay taxes, it doesn’t need an EIN.
The IRS defines a business as “a person engaged in a trade or business.” This includes sole proprietorships, partnerships, corporations, limited liability companies, trusts, estates, and government entities. Businesses are taxed on income earned during each taxable year. They are also responsible for filing quarterly employment and payroll taxes.
Businesses cannot deduct expenses from their personal income and vice versa. For example, a corporation cannot deduct employee salaries as part of its operating costs. However, a corporation can deduct dividends paid out to shareholders.
If a business owns the property, it is generally expected to maintain accurate records of those assets. These include receipts, invoices, bills, leases, contracts, etc. Depending on the type of asset, additional documentation may be necessary.
James Rourke is a business and legal writer. He has written extensively on subjects such as contract law, company law, and intellectual property. His work has been featured in publications such as The Times, The Guardian, and Forbes. When he’s not writing, James enjoys spending time with his family and playing golf.
