Limited Liability Companies and Nolo's Not-so-Limited Software
Converting your company into an LLC is a snap with LLC Maker.Matt Lake, special to PCWorld.com
Personal liability: two words that can strike terror into the heart of any struggling small-business owner. A new option for alleviating that terror is to operate your business as a limited liability company. Such an arrangement shields owners from liability in excess of their equity in the company; it also offers pass-through taxation, so you pay tax on your company's income only once.
But to become an LLC in the eyes of the law, you're bound to get wrapped up in paperwork and tied up in legalese. That's where Nolo Press's $54 LLC Maker 1.0 comes in--and it earns my hearty praise for its clarity and conciseness. Developed by a corporate attorney who specializes in the field, the program teaches you the pros and cons of making your new business an LLC and converting an existing sole proprietorship or partnership into one.
LLC Maker does a nice job of laying out costs and tax structures. It also illuminates the implications to your business's state and federal taxes. Best of all, it creates the documents you'll need to file in any state. Using the program's plain two-window interface with buttons and tabs, you can wrap up the preliminaries and application in a matter of hours.
The Making of an LLC
Most of what LLC Maker expects of you is basic stuff. You read instructions, make selections, and fill out on-screen forms. The software takes care of the tedious part, creating and addressing documents in the format your state requires. After you enter the relevant details (the contact information and financial stake of each member, the name you're applying for, and so on), the program pushes out a Rich Text Format file, neatly addressed to the correct department in your state.
Applying for LLC status requires a few forms, and this program provides them all--from an initial state contact letter, name reservation, and certificate of organization (the state application form for an LLC) to an operating agreement for the company, which sets forth the basic rules of operation, including each member's voting rights and interest in the company's capital and profits.
The program also provides an excellent database on each state, including contact information, phone numbers, Web sites, and the State LLC Act. The ability to view each section and subsection of a regulation is very helpful, as is the thorough listing of different filing fees and annual fees. State-based fees vary widely--from $50 in Arkansas to $500 in Massachusetts. And the variety of annual renewal fees (or taxes) is also an eye-opener: Some states don't charge annual LLC taxes, but California, Delaware, Massachusetts, and others slap on a flat fee ranging from $100 to $800 per year, according to the program. That information alone is worth the price of the program.
But LLC Maker's not perfect. For one, there are some understandable if convoluted restrictions on the use of the software: You can use LLC Maker to create more than one LLC as long as you are a member of each LLC, but any use for third parties requires a commercial license from Nolo. And on 17-inch or smaller monitors, even at relatively low resolutions such as 800 by 600, the explanatory text is small and gets rather hard to read after a while.
That said, it's hard to imagine anything that could outdo LLC Maker's combination of ease and low cost and still provide you with everything you need to set up a limited liability company.
Overall, Nolo's LLC Maker is a great deal. It covers the whole process of setting up an LLC in any state, and at $54 it costs less than what a lawyer charges for an hour. Even if you're not interested in this particular program, Nolo's Web site offers a wealth of free legal advice on a variety of issues.