LLC Formation in South Carolina
Asset protection is an essential component to an effective estate plan. Whatever amount of accumulated wealth you have, however you want to protect or increase it, we can help keep your assets safe. In addition, we can identify gaps in your current protection that you may be unaware of and show you options that will protect your home, real estate holdings, and other investments. One type of asset protection is an LLC formation. This comprehensive service allows you the flexibility to manage taxes like a corporation, while protecting your assets. We will help you to decide whether creating an LLC will be beneficial to you, and, if so, will assist you in taking the necessary steps to create one.
- Family LLC
- Filing Articles of Organization
- Appointing a Registered Agent
- Operating Agreements
- Compliance with Tax & Regulatory Requirements
An LLC is a legal entity with characteristics of both a corporation and a sole proprietorship or partnership. It’s an effective tool in estate planning for small business owners from the unincorporated association. It can distribute income to each of its members in several ways, including equally or based on each member’s capital contribution. This differentiates an LLC from a corporation since a corporation distributes its income to shareholders on a per share basis. Also, an LLC is a “pass-through” tax entity (like a sole proprietorship or a partnership). The profits and losses of the LLC pass through to its owners and are reported on their personal tax returns.
Advantages of Forming an LLC in South Carolina
If you are a small business owner, forming an LLC may be a wise decision. Unlike corporations, LLCs are flexible, able to be tailored to the specifics of your business. As part of your estate plan, forming an LLC may enable your business to thrive while it remains protected from possible risks. There are a number of reasons that forming an LLC may be recommended by one of our estate planning attorneys, including to:
- Raise seed capital — smaller investors are reassured by the LLC designation
- Protect your personal assets from business creditors, lawsuits, and probate fees
- Protect your intellectual property
- Allow investors using pass-through taxation to deduct their contributions and losses
- Permit you to execute a short-term project, stating a specific date of dissolution
- Minimize your tax burden
- Have the ability to alter profit distribution among members
Steps Involved in Forming an LLC
Though not complicated for legal professionals, forming an LLC requires enough drafting and filing of documents, registrations, and deadlines to overwhelm the average person. Our team will help simplify the task by helping you to:
- Choose a name for your LLC
- Appoint a registered agent for service of process
- Prepare an operating agreement
- Meet tax requirements, Employer ID number (EIN) and any necessary business licenses
- Register to collect sales tax with the South Carolina Department of Revenue
What is a Family LLC?
A Family LLC is a form of a limited liability company that is created by family members who are blood-related or related by marriage. It is a useful method to protect family assets from creditors, and it can be helpful to divide income among several generations.
The founding member of the Family LLC is usually the managing member. The other members have very limited, if any, management rights. This lack of control in the LLC allows the other members of the LLC to hold significant assets at a discount. Selling memberships is generally not permitted or only allowed in limited circumstances. Nonetheless, the family can craft an operating agreement that adjusts the limitations or restricts as they see fit.
Limited liability companies provide charging order protection. In fact, charging orders are the exclusive remedy for creditors to collect against an LLC member in South Carolina.
Without this type of protection, you may be forced to turn over your interest in the LLC to a creditor. That also means that the LLC ownership could be compromised by a creditor take over. With charging over protection, you do not have to worry about this type of situation. The only asset that a creditor can take from an LLC member related to the LLC is any income distributions or profits you obtain from the LLC. That way, the LLC’s integrity is not compromised by any member’s personal creditors.
Operating Agreements in Family LLCs
Perhaps the most appealing part about developing a Family LLC is that you can create an operating agreement that works for you and your family. It is very flexible. Most family-based LLCs will restrict transferring membership and ownership rights as that is the term that protects the assets from creditors. Other than a few other basic requirements, the managing member is free to craft the agreement however he or she sees fit.
The “Family” Business
While many Family LLCs are based on a family business, they do not have to be. However, this estate planning tool does work well for family businesses. It provides a means for families to separate their personal accounts and their business. It also gives families a viable method to pass business assets on to other family members without having those assets in their estate. It works well for:
- Rental properties
- Real estate holdings
- Brokerage accounts
- Investment assets (such as mutual funds, stocks, and bonds)
- All of a family business or any portion of it
Keep in mind that personal residences generally should not be included in an LLC. A more traditional trust is often a better option for an individual home.
Creating a Family LLC
While Family LLCs have many benefits, they are somewhat cumbersome to maintain. Family LLCs have many of the same filing and upkeep requirements that corporations would have, including necessities such as:
- Holding annual meetings
- Keeping regular books and records
- Regular filings with the Secretary of State
- Tax requirements, including obtaining an EIN
- Business licenses
- Assigning an agent for service of process
Contact us today to find out if an LLC formation is right for you.