Multi-Member LLC: Comprehensive Guide
- 1 What is a Multi-Member LLC?
- 2 What are the Benefits of Multi-Member LLC
- 3 Basic Steps to Form a Multi-Member LLC
- 4 Conclusion
What is a Multi-Member LLC?
A multi-member limited liability company (LLC) is a company that’s formed by more than one person that shares responsibility for the company’s debts and liabilities.
This type of company is typically made up of at least two people and can be owned by an individual, a family, or other groups. A multi-member LLC differs from a single-member LLC in that each owner shares the responsibilities and benefits of the LLC equally.
The primary difference between a multi-member LLC and other business structures such as S corporations, C corporations, partnerships, etc. is the liability protection afforded to each member of the LLC.
If you participate in any other type of business other than an LLC, your personal assets are exposed to potential lawsuits filed against the company. However, with an LLC you are shielded from these lawsuits unless they are personally filed against you.
What are the Benefits of Multi-Member LLC
There are many benefits to forming a multi-member LLC. A multi-member LLC offers protection and benefits that might not be available with a single-member LLC. Here are the most important benefits:
- The members of an LLC can be compensated with “drawings” from the business, which is taxed as individual income for those who take it.
- A multi-member LLC offers greater liability protection than a single-member LLC, as well as the option to share ownership with other investors or partners.
- Multi-member LLCs allow for greater tax efficiencies than single-member LLCs. They may be able to save on state taxes, federal taxes, and social security taxes.
- Multi-member LLCs have more flexibility in distributing profits among their members.
Basic Steps to Form a Multi-Member LLC
In this in-depth guide, I will also tell you how to form multi-member LLC. For forming multi-member LLC, you have to follow six steps:
Step 01: Name your Multi-member LLC
The next step to form a multi-member LLC is to select the name of your LLC. The name of your LLC is essential in obtaining an EIN and opening a bank account in the U.S. for your business.
There are a few guidelines to follow when you are about to name your multi-member LLC:
- The company name must include the term-limited liability company or the abbreviations LLC / L.L.C.
- Specific terminologies like FBI, State Department, etc. they can mistake your LLC for the government agency. The use of such terms is forbidden.
- The use of restricted words like University, Lawyer, and Banks requires additional documents and an authorized person.
Step 02: Hire a Registered Agent for Multi-member LLC
The next step to form multi-member LLC is to appoint a Registered Agent.
A Registered Agent is a person or a company who receives all official mail and processing services on behalf of your business. To keep your business in good standing, you must maintain a registered agent, which we do for $ 99 per year.
They are required by law and must maintain a physical address and maintain regular opening hours. Since you do not live in the United States, these are requirements that you cannot meet.
Micahgutu Formation is best for this task. For Registered Agent service, we charged $99 per year, which is comprehensively cheap and more valuable than others.
Step 03: File a Certificate of Formation
In the next step, you have to file a Certificate of Formation which is known as Articles of Organization with Secretary of State which cost varies from state to state.
The Certificate of Formation must include:
- Name of your Multi-member LLC.
- Name and Address of the Registered Agent of your LLC.
- Signature of an Authorized Person.
Step 04: Create an Operating Agreement
An Operating Agreement is necessary for a Multi-member LLC. An Operating Agreement is a document which is sets out the rights and responsibilities of the members and managers of an LLC.
If you do not have an Operating Agreement, state LLC law will govern the operation of your LLC.
Step 05: Apply for an EIN
The next step to form a Multi-member LLC is to apply for EIN. An EIN stands for Employer Identification Number. You will require an EIN to file and pay taxes and open a bank account.
Once the State has verified that your Articles of Incorporation (for LLCs) or Articles of Incorporation (for corporations) have been processed, you can apply for an EIN by completing Form SS-4 with the Internal Revenue Service (IRS).
Step 06: Open a Separate Bank Account
The last step for starting a Multi-member LLC is to open a separate bank account for your business. Opening a separate bank account for your business helps protect your personal assets from business liabilities.
Most people that start a business, or buy a business, will form an LLC. This is true for many reasons. One of the most important benefits of a multi-member LLC is protection from liability.
In other words, if your company does something wrong and gets sued, you do not have to worry about paying out on behalf of the company because each member would be responsible for their separate debts.
There are also tax benefits that come with a multi-member LLC which can help you save a lot of money. That’s why a multi-member LLC is great for your business.