The problem, as usual, is the IRS. In order for the LLC to gain the benefits of partnership taxation it must comply with some fairly complicated guidelines. If those guidelines are not followed the LLC will be taxed as a corporation which, in most cases, is not what the owners wanted or planned for. To complicate things even more the guidelines are flexible; allowing the organizers to choose which corporate characteristics they want and which ones they can live without. Of the four corporate characteristics, as long as the LLC has only two of them, everything is OK. If it has three then the LLC is too much like a corporation and will be taxed as one. Understanding these corporate characteristics and how to put them into the Operating Agreement can get pretty complicated.
Some of the states require a written operating
agreement and some do not. California allows an oral agreement and it can
be as little as an agreement to form an LLC and operate the company as
such. Given the IRS regulations, however, it is virtually mandatory to
have a properly drafted one. Bottom line - You will probably need help
and some legal and tax advice.
IS THERE AN ALTERNATIVE? IS IT AFFORDABLE?
The answer is yes. Order the LLC Kit. Here's how!
Kit Designer, Steven E. Davidson has been a practicing attorney in California for 25+ years. His experience with the limited liability company came with his own search for the proper business entity for a project he was developing in 1994. A corporate structure had too many restrictions and a limited partnership wouldn't allow the partners to be involved with the management of the business. The LLC was a brand new entity that fit the bill perfectly. Very little red tape and easy to raise venture capital because any person or entity could join. Based upon that success, Mr. Davidson was convinced that the LLC would become the entity of choice for most small business start ups and that information about them would be appreciated. The internet was just becoming popular at that time and the blend of new information and a new delivery system was perfect. The kits were initially delivered by snail mail with the usual delays and problems we have all come to know and love. Very quickly though, other entrepreneurs on the web kept encouraging Steve to develop a faster delivery mechanism with a digital version of the kit. E-mail became the obvious answer and sales have increased dramatically with this upgrade. Not only does the customer receive the kit days earlier and save ridiculous Federal Express charges that are outrageous, but now you immediately have your whole company in your computer and ready to customize for whatever comes up. Filling out the forms is easier, correcting mistakes is easier and if you need a copy, well, you know the rest.
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