What are the requirements for the formation of a family company and a limited liabilty company in State X, United States?
A family company could be formed using many different formats: S corporation, C corporation, general partnership, limited partnership, trust, limited liability partnership, or the limited liability company ("LLC"). Although the LLC is the most common format, sometimes a different approach, and often a combination of approaches gives you the best result. That, sorry to say, really requires expert input from a skilled corporate attorney and/or smart tax accountant. The on line services (you know, form your own corporation for 9 cents in 30 miutes, kind) really cannot give you that level of insight and planning. Thus, odds are an LLC is the entity of choice, but perhaps not.
Once you've decided on which entity, the entity needs to be formed under state law, usually the state you do business in. If you have a multi-state business you'll have to select which state to set up the business entity, and then you may have to have that entity authorized to practice its business in other states where it operates (unless its level of involvement in those other states does nor rise to the level sufficient to require such a filing). Again, unfortunately, questions you really need to put to a lawyer.
Once the business is formed and all the appropriate states you'll likely have to get a tax identification number. While you can do this for free with the IRS, you should spend the bucks for a consult with a sharp tax accountant, because there inevitably will be a range of issues to address (payroll tax, sales tax, family tax planning, etc.).
The basic legal paper work has to be put in place. This will vary somewhat depending on the entity. For an LLC it will include the certificate you file with the state, an operating agreement which is the legal agreement governing the relationship between owners, and other documents (depending on the situation).
Entities are formed at the state level, not at a federal level. This assures that each state can have its own legal and tax system for you to contend with!Even if it all sounds simple, get it set up right with good professional advice. You can minimize professional fees by putting together lists of information, making decisions, etc. in advance. You can review draft documents among family members when lawyer's clocks are not ticking and make decisions. But don't be penny wise and pound foolish. See Shenkman "Starting Your Own Limited Liability Company" by John Wiley.
Subscribe to our email list to receive information on consumer webcasts and blogs, for practical legal information in simple English, delivered to your inbox. For more professional driven information, please visit Shenkman Law to subscribe.