Setting Up An LLC For Investment

Investing may not sound like a good idea right now due to the state of the world. The economy is tanking with 26% of the US civilian labor force already filing for unemployment insurance claims, and 34.07% of small businesses predicted to close in the next few months. But if you’re one of the lucky few who still receive a steady paycheck, experts are still recommending that you invest in order to grown your funds.

One way to invest is through an LLC. The Balance explains how this can allow you to invest with a partner or with family members to form an investing club where you pool your money to invest in shares of stock, bonds, or mutual funds. You can also use it to create small businesses, develop real estate, and participate in other business or investment ventures.

What is an LLC?

The concept of a LLC is simple. A limited liability company (LLC), is a business structure in the US where the owners aren’t personally liable for any of the company’s debts or liabilities.

Writer Alex Lago claims that in the event someone was to collect debts, they wouldn’t be able to collect on your assets such as your house or bank accounts. If your business gets sued, your personal assets will remain untouched.

Setting up an LLC

Regardless of which state you live in, the process of forming an LLC is similar and straightforward, save for a few requirements, and a crucial part that is called an operating agreement.

To the uninitiated, it’s an agreement that specifies the terms by which your LLC will operate. ZenBusiness outlines the information typically found in an operating agreement, which includes the members’ percentage interests in the business and how profits and losses will be allocated. It will also determine the members’ voting power, rights and responsibilities, and “buy-sell” provisions, which contain procedures of what’s going to happen if/when a member wishes to sell their interest, passes, or becomes disabled.

Having an operating agreement is essential because it means everyone is expected to work under an agreed-upon set of rules and regulations when it comes to investing. The agreement eliminates any ambiguity and reduces any misunderstandings that may arise. Before you invest through an LLC, be sure to carefully review the operating agreement to know what you’re getting into. You may want to consult with a lawyer to help you make the decision.

After laying out the operating agreement, the rest of the process is straightforward. Once you have gathered information on all the owners and members who want to be part of the LLC, you choose a unique business name and provide an official address.

The company name must include the term “LLC,” and it must be unique from any other LLC operating in the state. You must then assign a registered agent, which the Chronnotes is the person held responsible for accepting tax and other business documents on behalf of the company. It should be noted that it doesn’t have to be an individual person; it can be any resident of the state or a business entity authorized to do business in that state, so long as the agent has a physical address in the same state.

The last step is filing articles of organization with your secretary of state’s office. It’s a short form asking for the names of the LLC and its members, as well as their contact information.

The fee ranges from $30 to $200, but a few states also have other registration requirements. The Wall Street Journal recommends finding the rules and costs involved at your secretary of state’s website. Lastly, it would be in your best interest to document major business proceedings and lay out formal procedures, so you can further protect your LLC status.

If you are considering investing this year, an LLC could be one of the safest bets. And due to the diversity of investment options available through an LLC it could very quickly expand your portfolio.