DoMyLLC.com DoMyLLC.com
  • Start Your Business
    • LLC
    • S Corp
    • C Corp
    • DBA
    • Form a Professional Corporation
    • Apply for an EIN
    • Nonprofit
  • Compliance Solutions
    • Business Filing Services
    • Amendments
    • File a DBA Online
    • Foreign Qualifications
    • Dissolution
    • Reinstatement
    • Withdrawal
    • Certificate of Good Standing
    • Conversions
    • Certified Copies
    • Corporate Entity Management Services
    • Corporate Bylaws & Minutes
    • LLC Operating Agreement Filing
    • Annual Report Filing Services
    • Create & File Timely Initial Reports
    • Corporate Seals & Embossers
    • Registered Agent Services
    • Appoint a Registered Agent
    • What is a Registered Agent?
    • Find a New Registered Agent
    • Registered Agent Faqs
  • Learning Center
  • About Us
  • My Account
info@domyllc.comBlog
888.366.9552
DoMyLLC.com DoMyLLC.com
  • Start Your Business
    LLC
    S Corp
    C Corp
    DBA
    Form a Professional Corporation
    Apply for an EIN
    Nonprofit
  • Compliance Solutions
    Business Filing Services
    Amendments
    File a DBA Online
    Foreign Qualifications
    Dissolution
    Reinstatement
    Withdrawal
    Certificate of Good Standing
    Conversions
    Certified Copies
    Corporate Entity Management Services
    Business Filing Services
    Corporate Bylaws & Minutes
    LLC Operating Agreement Filing
    Annual Report Filing Services
    Create & File Timely Initial Reports
    Corporate Seals & Embossers
    Registered Agent Services
    Appoint a Registered Agent
    What is a Registered Agent?
    Find a New Registered Agent
    Registered Agent Faqs
  • Learning Center
  • About Us
  • DoMyLLC.com
  • DoMyLLC Blog
  • 101
  • Is It OK To Form An LLC With Family And Friends?
Is It OK To Form An LLC With Family And Friends?

Is It OK To Form An LLC With Family And Friends?

on November 26, 2020by Steven Pickettin 101, DoMyLLC Blog

A lot of individuals think of starting a business with family and friends. The idea of working with people whom you know, like, and trust is appealing. After all, it may be easier to achieve success when co-owners share the same passion and dreams. However, doing that can be daunting as well. There are numerous horror stories out there of broken relationships due to disagreements when they form an LLC.

Having Structure When You Form An LLC

Generally, it is okay to form a business with family and friends. The problem is that it is possible to have contrasting strategies and different personal dynamics when it comes to co-ownership. Having a close relationship with co-owners can create an emotionally charged work environment. It may be challenging to keep business and personal relationships separate.

A good way to address that issue is to have structure. Many family-run companies suffer due to a lack of proper planning and a solid foundation. Setting up a structure will clarify the roles of each party and prevent disagreements and conflicts in the future.

Choosing an appropriate structure will also provide competitive advantages. The company can be sure that everyone is on the same page when it comes to the mission of the business, the strategies it will use, and the responsibilities of each owner.

Form An LLC

There are various business entity structures that companies can choose from. It is important to properly weigh the pros and cons of each before making a decision.

A good option for businesses owned by families and friends is the limited liability company (LLC). It is among the least complicated types of structures. It is easy to form and maintain.

Here are some of the benefits that an LLC offers:

·   Asset protection for owners
·  Pass-through taxation
·  No double taxation
·  Flexibility in ownership and management
·  Freedom to choose how to distribute profits

What To Do

Aside from choosing the right structure, it is equally important to know how to ensure a good working relationship with friends and family. Here are some tips to follow:

·   Communicate Properly

In any kind of relationship, communication is important. Make sure all parties understand what is going on and what they are supposed to do. For instance, leave the marketing to the one who has the best skills and knowledge about that aspect. Assign accounting to the person who is financially savvy. The most important thing is to make sure everything is clear.

  • Decide On Ownership

It would also help to determine the percentage of ownership early on. Will the company split ownership 50-50?

  • Create An Agreement

An important document for LLCs with multiple members is the operating agreement. While it may not be a requirement, it is highly advisable to have one.

The operating agreement will set out the rights, power, duties, and responsibilities of each owner. It also includes details on how to run the company, which include the processes that the LLC needs to follow for the management of the business operations. It can have provisions on how to add or remove members. Additionally, LLCs can define the rules on how the company will be dissolved.

Family LLC

For family-run companies, it is important to take note of a specific type of LLC. That is the family LLC. So what exactly is it?

It offers the same features as other types of LLCs. But, as its name suggests, it is an LLC formed by members related either by blood or marriage. Aside from being formed for business purposes, a family LLC can also own rental properties and brokerage companies. One advantage of this form is that it allows one to keep assets in the family. It is possible to transfer assets to other family members while reducing taxes for that person and their family members.

Getting Started

To form an LLC, a company has to go through a process that the state has set. The requirements and fees will vary depending on where the owners decide to organize their business.

Typically, the state will require the submission of formal paperwork and payment of the corresponding fees to the governing agency. In most cases, the document is referred to as the Articles of Organization or Certificate of Formation. The state process may also require the completion of multiple steps such as choosing an appropriate name, appointing a registered agent, and obtaining necessary licenses and permits.

To learn more about the steps on how to form an LLC, contact a reliable third-party organization like DoMyLLC. Our team of experts can help streamline the whole ordeal and provide a hassle-free experience.

  • like
  • tweet
  • +1
  • share
  • pin it
  • mail
  • Previous

    Understanding The Basics Of California Incorporation

  • Next

    Business Success Tips: How To Stay Motivated In Challenging Times

Search

Categories

  • 101
  • DoMyLLC Blog
  • Finance
  • Human Resources
  • Infographics
  • Law
  • Marketing
  • Home
  • My Account
  • About Us
  • Contact Us
  • Privacy Policy
  • Terms of Use
  • Sitemap
DoMyLLC.com BBB Business Review
Copyright 2023 DoMyLLC.com