LLC for Investment
Are you thinking about investing with someone else, or starting an investment club? Is your family interested in pooling their money to purchase property or start a family business? If so, setting up an LLC may be the best way to do this. Limited Liability Companies (LLCs) are frequently used by people who want to pool their resources and invest in things like businesses, real estate, or securities.
Note: The IRS does not allow LLCs to invest in retirement vehicles such as 401ks, IRAs, and ROTH IRAs.
What is an LLC?
An LLC is a legal business entity that combines the most popular benefits of two other business entities—the limited liability of a corporation and the tax benefits of a limited partnership.
The members/owners of an LLC are not actually partners, but are taxed like partners by the IRS. What's more, they benefit from limited liability like the shareholders of a corporation, even though the company is not actually a corporation.
This combination provides the members an LLC with the following advantages:
- Pass-through taxation;
- Limited liability for any debts and lawsuits incurred by the business; and
- Management flexibility
An LLC is also easier to set up and maintain than a corporation, with fewer formal requirements.
Why Set Up an LLC for Investment?
What makes an LLC attractive for investment is its operating agreement. An LLC's operating agreement outlines and dictates what the LLC can and cannot do. Because of this, it can be an excellent vehicle through which multiple parties can make investments together.
For example, an LLC's operating agreement often contains a provision that dictates how members of the LLC can sell their membership in the company. An LLC for investment can be set up so that its members cannot sell or transfer their share of ownership without the approval of the other members. This can prevent an unwanted change in the LLC's ownership makeup and is especially useful for an LLC that was set up as an investment vehicle for family members only.
Another provision often contained in an LLC's operating agreement is one that defines how the money in the LLC can be invested. Like a mutual fund or ETF prospectus, this provision can, for example, dictate that the LLC can't invest more than 50% of its money in stocks. Having clearly defined investment parameters will make it easier for multiple parties to be in consensus.
Lastly, LLC operating agreements sometimes contain a provision that requires its members to make financial contributions to the LLC on a regular basis. For instance, your LLC may require a monthly contribution of $50 from each of its members, to ensure that they remain vested in the LLC.
Where to Set up and LLC for Investing
Setting up an LLC for investing is fairly easy, once its members agree upon the operating agreement that will dictate how the LLC will invest their money and where it should be formed. While it is always best to incorporate in the state where your LLC will be doing business, incorporating in a different state may offer certain worthwhile advantages.
Two of the most popular states in which form an LLC are Nevada and Delaware:
- Nevada Over the past few decades, the state of Nevada has done a lot to make it a popular destination for businesses that want to incorporate. Today, many business consultants direct their clients to use a 'Nevada LLC' to hold their family assets, investments, and businesses, even if those businesses are based in other states. This is primarily because Nevada has very favorable tax laws for businesses and its LLC offers a great deal of privacy and anonymity.
For those looking to incorporate a business, Delaware offers a
long list of advantages. This made Delaware the top choice for
many businesses and investors long before Nevada's emergence,
and here are a few of the primary reasons why:
- Businesses pay very low taxes or none at all;
- Low annual filing fees;
- Asset protection; and
- A relatively simple start-up process
A Wyoming LLC
Of all of the options available, Wyoming is undoubtedly the best state in which to form an LLC. Here's why:
- You don’t have to be a U.S. citizen to set up an LLC in Wyoming.
- Wyoming has the cheapest annual filing fee of the three states mentioned here—only $50. This is compared to $400 for a Nevada LLC and $300 for a Delaware LLC. Any chance to save money when starting a new business venture is a huge benefit.
- A Wyoming LLC offers a great deal of privacy because anonymous ownership is allowed.
- There are no capital, state, or corporate gains taxes in Wyoming.
- Setting up an LLC in Wyoming is extremely simple. The typical Wyoming LLC can be set up in as little as 10-15 days, even faster if done online.
Contact an Experienced Wyoming Business Lawyer
Setting up an LLC can require a lot of documentation. Working with an experienced business lawyer can help you avoid mistakes and omissions that will ultimately cost you more money than you will save going it alone. Contact us to arrange a free, no-obligation consultation with an experienced and Wyoming Business lawyer.
An overview of our most popular services.
Form a wyoming llc
Wyoming was the first to allow limited liability companies in the United States. It continues leading the country and world to this day. Anonymity, charging order protection and single member LLC protections are just some of the reasons people do business in Wyoming.
Wyoming increasingly competes with traditional offshore providers. Self-settled trusts, private trust companies and more are achievable using a Wyoming situs.
WYOMING VIRTUAL OFFICE
Virtual offices solve a variety of problems. Whether you need a reliable phone, mail handling or a nexus - all three will find an office useful
FORM A WYOMING CORPORATION
Wyoming has no corporate income tax, does not disclose officers or shareholders and does not charge spurious fees (unlike Nevada). These benefits have led Wyoming to become the incorporation leader in the US.
WYOMING REGISTERED AGENT
Every company must maintain a registered agent. For anonymous companies, the agent serves as the public face of the company. We personally act as the agent for only $49 per year.
WYOMING MAIL FORWARDING
Does your company receive mail, but you're not in Wyoming to collect it? We can scan your mail for you to the client portal.