Business Entity

[Alan Petersen]

Now that my online business is picking up steam a friend who is an attorney suggested I organize myself as an LLC. I was going under the assumption of just continuing as a sole proprietor but as she put it...

I recommend that you do an LLC (which I would be happy to help you form). An LLC will give you a "liability shield", which protects any of your personal assets from liability. You can be the sole member of the LLC if you want, or you can have other members. If you're the sole member, you will be taxed like a sole proprietor (because it's a pass through entity) but also get liability protection. If you have more than one member, you'll be taxed like a partnership. Either way, there is no double tax (like with a C corp.).

Since she'll do all the paperwork and filing at no charge my only cost is the filing fee with the State so I figured it's time to get myself organized. It's a cool feeling. The toughest part is coming up with a cool name for company which has one sole member, yours truly.

I thought you might find the above advice from an attorney helpful. She's a Partner in a big law firm so I figured I better listen.

[theuniek1]

Definitely good advice. After taxes my first year online kicked my ass, it dawned on me that it may be wise to protect myself (personally) and jump onto the LLC bandwagon.

I went through The Company Corp. and it was the worst choice I've ever made. Since I'm branching out and considering another LLC, I may either do it myself, higher a local attorney, or go with another company I've had a better experience with, but under no circumstances would I ever choose The Co. Corp. again.

~ Teli

[Alan Petersen]

It's now official I now have an LLC!

[Alan Petersen]

Definitely good advice. After taxes my first year online kicked my ass, it dawned on me that it may be wise to protect myself (personally) and jump onto the LLC bandwagon.

I went through The Company Corp. and it was the worst choice I've ever made. Since I'm branching out and considering another LLC, I may either do it myself, higher a local attorney, or go with another company I've had a better experience with, but under no circumstances would I ever choose The Co. Corp. again.

~ Teli

It's pretty straight forward to file your self and save the atty fees if it's just you. If you have partners then it's a little tricky.

You just need to submit the articles of organization and the state filing fee. Check your states Sec. of state website they'll have the form you need.

One thing that is important is to research the name you want to use before filing to make sure it isn't already registered or trademarked. I did deep searches in google and at the PTO webesite. I seached for my business name and "trademark" "registered" etc.

Those are the main things my atty friend talked about so if you cover that , you should be able to do the name research yourself and file the LLC papers on your own and save lawyer fees. I did my own search and showed her what I found and she was fine with that.

[midwestmedia]

It's now official I now have an LLC!

Congrats! I've also been considering this as well. Here is what got me thinking about it seriously: Prior to a few months ago, I was single and I had owned my business for several years. Now that I'm married and we have more co-mingled assets, it seems like the prudent thing to do in order to shield ourselves from some crazy whack-job who might try to sue my business for something. I can't imagine why that would happen, probably a one in a million chance, but it seems like the responsible thing to do.

As far as taxes are concerned, does this increase or lower the rate you pay? Or do you essentially pay the same amount except via the legal entity?

Does anyone know of any other financial advantages there might be to an LLC?

Jennifer

[kristinecfp]

...If you're the sole member, you will be taxed like a sole proprietor (because it's a pass through entity) but also get liability protection. If you have more than one member, you'll be taxed like a partnership. Either way, there is no double tax (like with a C corp.).

This isn't entirely correct. When you form an LLC, you can elect to be treated as a sole proprietorship for tax purposes, or you can elect to be treated as a Corporation, even if you are the only member of the LLC.

There are tax benefits to electing to be taxed as a Corporation, so don't assume that you have to be taxed as a sole proprietor just because you are the only member of your LLC.

As far as taxes are concerned, does this increase or lower the rate you pay? Or do you essentially pay the same amount except via the legal entity?

Does anyone know of any other financial advantages there might be to an LLC?

Jennifer

Depends. If you choose to be taxed as a sole proprietor when you setup your LLC, then your taxes don't change (your rate stays the same). However, you can choose to be taxed as a Corporation, even if you are a single member LLC. A tax strategy that is used by many small business owners is to setup an LLC, elect to be taxed as a Corporation, then elect S-Corporation status. By doing this, you can take part of your profits out as salary (subject to payroll taxes) and part out as dividends (not subject to payroll taxes). If your business has a substantial profit, this strategy can save you quite a bit in taxes.

Hope this helps!
Kristine