Limited Liability Company

Limited Liability Company

The interior design market in the whole of the US continues to grow, and it is, therefore, the ideal business idea to start an LLC. Although the competition is high, what is needed to acquire a client base is to set the company apart from the competition by approaching business differently. The company will comprise two owners who will act as the Directors and several qualified interior designers, some of who will occupy certain office positions. The LLC will be called ‘Posh Interiors LLC,’ and it will have a central office in Maryland but have branches in several towns across the state. Posh Interiors will specialize in making the interior spaces attractive, safe, and functional while meeting the specific needs of the clients. The client base will include corporations as well as homeowners. The company will work under the universal accessibility standards and the codes and building inspection regulations to provide quality work to their clients. The benefit of starting this type of business will be that members will have limited liability, there will be no double taxation, and it will be easier to form the LLC.

A limited liability company (LLC) combines the liability protections of a corporation with the partnership ownership structure to form a hybrid entity (Kimmitt, Hayden, and Cahn, 2013, 5). It allows members to profit from their investments while legally protecting them from the actions of the company. An LLC can get taxed as a corporation, or the members’ income can be taxed. According to Maryland Code 4A-602, “membership interest in a limited liability company is personal property” unless otherwise agreed (FindLaw, n.d.). However, in case of own negligence and intentional acts or if a member breaches an obligation to contribute capital or illegal distributions, they become liable to the LLC or its creditors (Kimmitt, Hayden, and Cahn, 2013, 5). The owners of an LLC are also the members, and their number is not limited as long as they have the necessary legal capacity. Apart from individuals, any legal entity such as a corporation or another LLC can be a member. Other members included in the formation of Posh Interiors LLC will consist of registered agents who will receive official and legal documents, including lawsuits on its behalf.

The Articles of Organization is mandatory in the formation of an LLC because it forms the legal foundation for the company. According to Maryland Code 4A-204, the Articles of Association outlines the name of the LLC, the address of its principal office, and of its resident agent and any other provisions inconsistent with the law, which gives members authority to act on behalf of the LLC (FindLaw, n.d.).  Another essential document is the Operation Agreement, which outlines the management structure of the LLC, members percentage of ownership, distribution of profits and losses, what happens if members enter or exit the LLC, voting rights and how the LLC will be dissolved (FindLaw, n.d.). After drawing up these documents, they have to be filed with the State Department of Assessments and Taxation of Maryland and also pay the appropriate filing fee (Kimmitt, Hayden, and Cahn, 2013, 5). After filing the paperwork, Posh Interiors LLC must pay for the county trading licenses and other permits.

Posh Interiors LLC will begin its operations on 11th April, which will end on 31st December 2020 fiscal year corresponding to that of its members. The company will then be dissolved or terminated. The company will begin operations by obtaining an employer identification number and defining its fiscal year for taxation purposes. It will also get a bank business account, insure the company, and hire employees for the smooth running of the business. It is crucial to summarize the business’s income and expenditure records on a weekly or monthly periodic basis. Similarly, Posh Interiors LLC needs to maintain a general ledger which serves as its financial backbone. A general ledger documents the cash inflows and outflows daily, enabling the company to audit every financial transaction of the company (Henderson, n.d.). A general ledger includes both monetary and non-monetary assets in its accounts as well as liabilities (Henderson, n.d.). Since Posh Interiors LLC will not get taxed as a corporation, the record-keeping requirements are not strict as it is the members who get taxed. However, the company needs to prepare the end of the year annual reports to determine the growth or decline in business. It is, therefore, important to prepare statutory accounts using the general ledger data such as the income statement to show the profit or loss incurred during the accounting period (Crunch, 2019). The Statement of Financial Position will show the cumulative value of the company based on its capital, assets, liabilities, and reserves. Footnotes explaining the guarantees, loans, and advances given to directors is also important to keep track of all the company’s money (Crunch, 2019). It will also be necessary for Posh Interiors to submit the Statement of Financial Position and the Footnotes to the Companies House so they can be published and be available to all the interested parties, including potential investors (Crunch, 2019).

References

Crunch, 2019. Year-End Accounts Checklist for Limited Companies | Crunch. [online] Crunch. Available at: <https://www.crunch.co.uk/knowledge/tax/year-end-accounts-checklist-limited-companies/> [Accessed 9 April 2020].

FindLaw, n.d. Maryland Code, Corporations, and Associations | FindLaw. [online] FindLaw. Available at: <https://codes.findlaw.com/md/corporations-and-associations/> [Accessed 9 April 2020].

Henderson, K., n.d. Accounting Basics for an LLC. [online] Smallbusiness.chron.com. Available at: <https://smallbusiness.chron.com/accounting-basics-llc-5205.html> [Accessed 9 April 2020].

Kimmitt, T., Hayden, J., and Cahn, D., 2013. [online] Wtplaw.com. Available at: <https://www.wtplaw.com/siteFiles/professionals/A%20Legal%20and%20Practical%20Guide%20for%20Small%20Business.pdf> [Accessed 9 April 2020].