It is possible to create a Limited Liability Company or LLC with various advantages, such as the flexibility of operations and, in some cases, tax savings. However, whether your business is at the initial stages of setup or you are an experienced entrepreneur looking into a restructuring, setting up an LLC in a meticulous manner becomes crucial.
Therefore, here are four legal considerations you must account for in 2024 when setting up your LLC to ensure you are well-prepared for the journey ahead.
Different states have their statutes governing LLCs. Note the important deadlines, as you will most likely renew your license periodically. Failure to do so may cause your LLC to lose its status as a legally recognized entity.
LLC's ongoing provisions:
There are several new regulations that LLCs need to comply with, such as filing annual reports and paying necessary fees. The Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has established a new reporting requirement under the Corporate Transparency Act (CTA) that went into effect on January 1, 2024. These new guidelines will affect at least 32.7 million entities in 2024, requiring LLCs to file beneficial ownership information reports with the U.S. government.
These CTA guidelines detail:
Violations of the regulations concerning reporting under CTA (mainly an anti-money laundering law) may result in high fines, including losing your company’s good standing, which might affect how much business you can do.
You need to have a written operating agreement stating the initial capital contributions and subsequent distributions of each member for your LLC before getting into business. The contributions made by the members in terms of assets and services determine their allocation amount from this pie that is the business.
Apart from other clauses, the LLC agreement usually has a schedule of additional capital contributions that members intend to make in favor of the LLC throughout its life.
Contributions can be made in cash or non-cash assets by the members. These contributions should be recorded, and non-cash donations need to agree on the correct wholesale prices.
Think about how you will safeguard your business’s intellectual property, including trademarks and patents. By safeguarding your IP rights, consumers will have the privilege of getting quality and genuine products.
You obtain commercial rights to a trademark in the US by being the first entity to use it. Once you register your trademark with the United States Patent and Trademark Office (USPTO), you get added benefits and protections, after which you may incorporate the ® symbol immediately following the mark.
You’ll need to file your patent application with the USPTO to get a patent for your LLC. This will grant your business exclusive rights to create, sell, and distribute your invention for a period not exceeding 20 years.
Setting up an LLC offers your business many perks, including liability protection. Despite these benefits, there are many legal aspects that an entrepreneur needs to consider to ensure that their business remains compliant in 2024 and beyond.