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If you have been researching corporations or LLCs, you've surely heard that forming your entity in states like Delaware, Nevada and Wyoming can offer you various benefits and beyond what your state can offer you. See common questions answered by Jennifer Reuting below.
|Q: Hi, I am currently reading your book. It is really a great resource. Thank you! I have already formed my LLC and I am creating my company's identity right now. Should I always include "LLC" with the name? For example, is it OK to have just the company name (and logo) on a business card? Simply put: Should the business card read "Name of Company, LLC" or can it just read "Name of Company"? Thank you again. Cheers – Matthew|
Generally you want to use "LLC" on your name. It tends to add a bit of legitimacy to your company - after all, would you rather do business with "Bob's Discount Plumbing" or "Bob's Discount Plumbing, LLC" ??? – Another advantage is that it makes it known to anyone contemplating suing they will probably have a difficult time getting at your personal assets since you've taken the important step of forming an LLC! An exception might be in cases where it may get in the way of branding (Google would not sound so good branded as Google, LLC!). One thing to remember is that if you're filed with "LLC" on your name and you decide that you want to omit it, you may have to file a DBA (also known as a "fictitious firm name") in the states where you are doing business.- Jen
|Q: My business partner and I wish to elect for a member-managed LLC. I am slightly unsure how to proceed with finalizing my operating agreement taken from your book, however, as the language states that "the Company shall be managed by one or more appointed Managers." As I scale the size of my operation over the next several years, I expect to hire employees to manage functional departments (e.g. marketing, sales, engineering, etc.). How are these functional managers different from "Managers" as stated in the operating agreement template? Thanks, David|
Really great questions! The sample Operating Agreement I included [in Limited Liability Companies for Dummies] is just supposed to serve as a template. If you wish to tailor it to your member-managed company then you need to go through and make sure that the document is congruent in reference to being "member-managed" (as opposed to "manager-managed"). In the provision you specified, you can replace it with something along the lines of the following: "The Voting Members shall manage the Company. In their capacity as Managers, they shall have the right to make decisions and vote upon all matters as specified in this Agreement in proportion to their respective ownership percentage of the company. Voting members need not identify whether or not they are acting as a Member or Manager when they take action." "Non-voting Members have no right to participate in the management of the Company, nor vote on any matters of the Company. No Non-voting Member shall take any action or enter into any contract or obligation on behalf of the Company without the prior written consent of all of the Voting Members. Likewise, no Non-voting Member shall perform any act that is in any way pertaining to the Company or its assets." Now, in regards to your employees, the question you need to ask yourself is whether or not you and your partner want to comply with the above statement.
If you wish to give your employees full managerial powers then you may be better off being Manager-Managed and assigning your various employees as managers along with yourselves, or if you are set on your LLC being Member-Managed, then you can allow for specific contractual exceptions which you can outline in your Operating Agreement. One of the great things about LLCs is that they are very versatile. You have a lot of room to maneuver, just make sure it is explicitly and contractually stated and understood by all. Hope this answers your question! - Jen
|Q: I am thinking about a one-person consulting business. Your book says that single member LLCs are bad, because the IRS views them as a sole proprietor, but a CPA that I know says that the state of Texas still recognizes them as entities for legal purposes. Why is this bad? The CPA also says that a sole proprietor can get the "same" liability protection with a business liability insurance policy. Why do I want to go to the trouble of forming a LLC?|
One of the most frequent questions we encounter at MyLLC.com is in regards to Single-Member LLCs. MyLLC.com has a long-standing record of advising against forming single-member LLCs for a multitude of reasons. The foremost being that they simply do not provide your business with the same protection that forming a standard LLC affords you. When it comes to the federal government -- more specifically, the IRS -- Single-Member LLCs are not recognized as partnerships. For tax purposes, the IRS considers them "disregarded entities." This doesn't mean much as far as your tax bill goes -- the differences are minimal. However, while tax implications are inevitable in operating a business, the bigger issue is that assets of Single-Member LLCs are not as well protected as standard LLCs should legal issues arise.
MyLLC.com always suggests that you consult with your legal and tax adviser prior to making any final decisions regarding your company. Our recommendation however, is that it is worth giving up a small fraction of your company to a friend or relative in order to form an LLC as opposed to forming a Single-Member LLC. That small percentage could potentially save you tremendously should you ever be involved in litigation. Your focus needs to be on continuing to expand your company and not risk losing everything. Sometimes you have to give give a little to gain a lot.Updated 2015-11-04
|Q: Do all managers’ names and addresses need to be on the Articles of Incorporation or just the registered agent’s? In addition, why is it better to have a registered agent outside the LLC?|
Depending on the state, you will generally have to state whether or not your LLC is manager-managed or member-managed and will have to list either the initial manager or member (respectively) in the Articles of Organization. Keep in mind though that this information can easily be changed later on.
As for the second question, I get asked about this ALL the time. Your registered agent is where all of your company's service of process and state filings will be sent. Generally, registered agents have very specific state-imposed responsibilities such as the "regular business hours" they need to maintain and strict record-keeping requirements. If you don't comply with these then you could face serious repercussions. For example, if you decide to go on a business trip and there is no one at your office during the required business hours to receive service of process then you could theoretically lose the lawsuit by default and spend thousands of dollars getting a judgment reversed assuming you can get it reversed at all!
Additionally, a good registered agent will make sure you stay current on your state filings and forward government-related mail to you. MyLLC.com only charges $99 per year for registered agent service and, in my opinion, the cost is well worth the peace of mind whether you use MyLLC.com or someone else!
|Q: Does the IRS tax you on the actual cash distributions received or your member allocations? I am forming an LLC, and I want to retain 51% voting rights while my partner will have 49%. I want to distribute the profits evenly to him, myself and a third-party developer at 33% with special allocations. We are building an online software application and have virtually no money to pay the developer and don't want to dole out ownership shares. Thanks, David|
MyLLC.com often receives questions regarding cash distributions when you operate an LLC. While we highly recommend that you speak to your personal tax adviser regarding any distribution questions. However, the following information provides a general overview of cash distributions and the basic policy instituted by the IRS.
If your LLC is subject to partnership taxation then the IRS will tax you on the allocations, not the actual cash distributions. However, varying the allocations is not as easy as it sounds and best to be avoided if possible. Ownership aside, a solid strategy is to issue your companies programmer a Profit Sharing Agreement which gives a specific definition of the profits being shared (i.e. if it is "net" profits, then what will be deducted) and pay that individual as an independent contractor. This will be tax-deductible to your company and you can then share the remaining profits with any partners according to ownership percentage.
The critical aspect is to make sure your LLC is above reproach and holds a Certificate of Good Standing. If you are considering paying cash distributions to partners in your company, you can be assured the IRS will start paying closer attention to your business. When you partner with MyLLC.com when forming your LLC, our highly experienced experts will assist you in keeping your LLC in good standing. Contact us today for further information.Updated 2015-10-29
|Q: I have an LLC in Missouri. Can I move it to Florida or Delaware? If so, are there tax advantages?|
The decision to re-domicile your current LLC from one state to another is one that should be made only after extensive review of the tax laws and how they affect your particular business. The simple answer is, yes. If you have an LLC in one state you can move or re-domicile it to another state with greater tax advantages. However, if your LLC is subject to pass-through taxation, then domiciling (or re-domiciling) will be of no benefit to you. With pass-through taxation, your company profits are allocated to the partners then paid as personal income to the state or states in which you and your partners live.
Another major issue to consider it that there have been changes recently in states that were once considered superior states in which to form corporations and LLC's. For instance, Nevada's tax laws recently have changed so radically that MyLLC.com no longer recommends filing any business entity there. It is imperative that you consult your tax adviser prior to making any decisions regarding re-domiciling your LLC. Many of these changes are not only complicated but they also contain long term consequences as your companies gross revenue increases. Just be certain that you make a well-informed decision prior to proceeding.
Page updated on 2015-09-18
|Q: Can I get a LLC if I am a convicted felon?|
MyLLC.com was recently asked if being a felon disqualifies you from forming an LLC. While we always suggest you consult your personal legal adviser regarding any business decisions, MyLLC.com offers the following basic information.
The good news is that being a felon doesn’t disqualify you from owning your own business or entity, but the bad news is that there might be restrictions on what kind of business you can legally operate. For example: if you are thinking of opening a casino you would not be able to obtain a gaming license. If your offense was a sex offense it is unlikely that you would be able to obtain a license to operate a day care, etc. While these examples are extreme, they serve to prove the point that felons may operate an LLC but only within the guidelines dictated by your state and often the Federal Government as well.
MyLLC.com recommends contacting the Secretary of State in your state to clarify what the laws are in your particular area. There are often review boards who consider your licensing and make their decisions on a case by case basis. Should you receive the all clear to proceed with your business, MyLLC.com has highly experienced professionals standing by to assist you with forming your LLC. Contact us today to get started!Updated 2015-10-29
|Q: I am a resident of California. I am interested in purchasing a motorhome out of state (AZ). I have been told by the dealer that I should form an LLC to avoid sales tax. I plan on taking the motorhome back to CA. Does California recognize an out of state LLC? Would there be any problems in registration/taxes/fines should I remain in CA. with the vehicle and resale in the future? Thanks for your assistance, Ron|
Hi Ron, yes it is true! There are certain jurisdictions such as Montana where there are a strangely disproportionate number of motorhomes registered. I'm not sure about Arizona, but using Montana as an example, a Montana LLC is considered a Montana resident, and like any other resident of Montana does not have to pay sales tax on any purchase. Essentially, you aren't buying the motor home, your Montana LLC is! Depending on your state's sales tax rate, you can legally save $25,000 or more on your motorhome purchase not to mention lower registration fees than many other states. There are companies that specialize in exactly this type of transaction. This seems like solid advice you've received from the dealer for now. As for future problems, I wish I could tell you, but my crystal ball is broken. ;-) -Jen
|Q: I sell on eBay worldwide...from North Carolina...I plan to net approximately $15,000 profit or more. Would it be better for me to set up a single-member LLC in Wyoming? How would I go about paying taxes?....regarding state taxes in NC...would I need to register the business in NC as well? And I assume no need to pay self employment tax? My personal tax liablility would be that which I pay myself out of the LLC right? How is the LLC taxed? Do I need to do quarterly estimated taxes? I don't think North Carolina allows single-member LLC...and perhaps the best location is Wyoming since I do not have a brick and mortar....Your advice is kindly appreciated.|
Great question! Unless you elect “corporate” taxation for your LLC, you will be stuck with a pass-through taxation where all of the profits and losses flow through to your personal tax return. In the case of pass-through taxation, you will not gain any state tax benefits from an LLC – after all, your profits will just flow to your personal tax return and, along with your other income, you will be required to pay NC state taxes.
The only way to truly derive tax haven benefits with an LLC is to elect “corporate taxation”. This will keep all of your business income in the state in which your company is formed (in your case, Wyoming). Just keep in mind that electing corporate taxation has some drawbacks, including double-taxation of profits. I advise you to seek out more information about this sort of taxation by either reading the book or speaking with your tax advisor.Best of luck!
|Q: I am currently reading your book. It is really a great resource. Thank you! I have already formed my LLC and I am creating my company's identity right now. Should I always include "LLC" with the name? For example, is it OK to have just the company name (and logo) on a business card? Simply put: Should the business card read "Name of Company, LLC" or can it just read "Name of Company"? Thank you again. Cheers - Matthew|
Generally want to use “, LLC” on your name. It tends to add a bit of legitimacy to your company - after all, would you rather do business with "Bob's Discount Plumbing" or "Bob's Discount Plumbing, LLC" ??? – Another advantage is that it makes it known to anyone contemplating suing they will probably have a difficult time getting at your personal assets since you've taken the important step of forming an LLC! An exception might be in cases where it may get in the way of branding (Google would not sound so good branded as Google, LLC!). One thing to remember is that if you're filed with "LLC" on your name and you decide that you want to omit it, you may have to file a DBA (also known as a "fictitious firm name") in the states where you are doing business.
|Q: After reading Limited Liability Companies for Dummies, I decided a series LLC is the way to go. Do you have, or can you point me to, the series Operating Agreement, Separate Series Agreement, and addendum to the Operating Agreement used to form a new series? I did not find templates of these forms on the CD. Thanks.|
Series LLCs and Series Agreements are basically a group of LLCs that keep your business entities, mostly real estate rental properties, separate and are easier to form than corporations. You get practically the same liability protection as you would if your formed a corporation, but depending on the state, the fees to file are typically lower. The tax structure also allows for more write offs which can be a tremendous benefit. But perhaps the greatest reason cited by business owners for forming Series LLCs is the liability when renting homes keeps each home protected from litigation. Should one home become involved in a lawsuit, the others cannot be attached. So, think of Series LLCs as a big LLC umbrella that protects all the other LLCs under it safe should the litigation floods begin as is often the case when you own multiple rental homes. Because each LLC is only liable for its own obligations, taxes, profits and assets, the others are fully protected.
The biggest issue with Series LLCs is the limited number of states that recognize them. Delaware is the leading state with the most Series LLCs filed, and only 11 others have followed suit including Illinois, Tennessee, Oklahoma, Utah, Wisconsin, Iowa, Nevada and Puerto Rico. However, due to recent tax changes in Nevada, MyLLC.com no longer recommends filing for any type of business entity in that state; the costs are simply too high.
You will most likely need a separate Registered Agent for each LLC in a Series LLC as well as separate bank accounts, payroll accounts, credit cards, and financial statements. Remember, the idea is to keep everything separate for the protection of all of your assets. So while the initial set-up is slightly tedious it is well worth it should legal issues arise. And, MyLLC.com is here to assist you with filing your Series LLCs as well as securing separate Registered Agents.
Be sure to talk to your tax professional before making any decisions regarding the structure of your business. And then contact MyLLC.com ! One of our highly trained professionals is standing by to assist you!Page updated on 2015-09-28
|Q: Hi there, I was hoping you could help me with this... I am currently at the stage of registering my LLC and when getting my FEIN number (online), I was not allowed to put a ".com" on my business name. I want to register my business in NJ as a ".com". Can I still do that if the IRS thinks I'm a "COM" and not a ".COM"? I don't want any discrepancies. Thank you! - Darryl|
Isn’t that annoying? The IRS doesn’t allow punctuation in their online applications, which is why you aren’t allowed to put a period in your “.com”. Other than defense, government agencies are not really known for keeping up with technology. My advice is that you simply replace the period with a space when completing the application. The state of New Jersey will understand the discrepancy.
|Q: I read your book. Does the double liability protection also include the state of Maine?|
Yes. LLCs for the most part have the same basic structure in all 50 states and DC.
|Q: I am forming an LLC for rental property but I do not want to use the rental address because I don't want any mail to go there nor do I want to use my home address. I would like to get a PO box but I am in the chicken-egg problem. Am I making this too complicated?|
What you need is a Registered Agent. In most states LLCs are required to have a registered agent. This is the address that goes on public record with the Secretary of State's office as authorized to accept service of process on behalf of the LLC. This is also the address where any important documents from the state are received. To see how we can help you, visit our Registered Agent Service page.
|Q: I recently formed an LLC holding company and quitclaim deeded my rental property from my wife and my personal name to the LLC's name. The LLC is a single member LLC (which are allowable in Illinois). Why do you state to file a form 8832 for a single member LLC? |
I don't understand how filing to be taxed as a corporation gives me any more or less liability protection.
Also, is your operating agreement sufficient to be modified for single member LLCs or would you buy the US legal forms version for $25?
With single member LLCs, you may not have the dual layer of liability protection known as "charging order protection." Charging order protection is a type of court order that restricts the claims of certain assets, such as securities and property, to their fiscal income only. Under charging order protections, assets can’t be liquidated or sold. In the eyes of the IRS single member LLCs are viewed as disregarded entity. This means that you are taxed exactly as if you were a sole proprietorship. Typically the only instance in which this is desirable if you’re using the LLC to hold real estate. You are going to want to speak to an accountant to determine which tax option will be best for your scenario.
Many of our clients do use our operating agreements for their holding companies. We also provide you with an editable version through our Entity Management System. For more information on single member LLCs you can read our page on Single Member LLCs.
|Q: Your Dummies book on LLC is the best I've read. Great job! My question relates to forming an LLC as a holding company of an US Patent. There are 3 reasons for forming the LLC. 1. Protection of Patent from membership liability and membership from LLC liability. 2. Membership can be sold to (transferred) to new members (foreign and domestic) under the rules of private placement. Transaction proceed flows directly to the member who sells his/her membership shares. 3. Royalty from the patent can be partially distributed to members and partially allocated for R&D. Are there any flaws in using LLC to accomplish the above?|
One of the most intriguing questions MYLLC.com gets asked is if you can form an LLC to hold a US Patent. The resounding answer is not only YES! But it is one of the wisest decisions you can make if you are an inventor. There are three main reasons for that:
Protecting your intellectual property with a US Patent is your first step. Your second should be to contact one of the highly experienced experts at MyLLC.com to determine which state to file your LLC as well as any other services you need to protect your interest. Contact us today to get started!Updated 2015-10-29
|Q: I'm a military spouse also employed by the U.S. government, and I've been looking into establishing an LLC to sell my oil paintings and photographs online. We move every 2-3 years, and potentially could live overseas. I'd like to start the LLC now in order to give it time to grow in a part-time status until I retire in 5-7 years and am then able to devote my full time to it. With the bulk of the sales coming from the internet, that could include both national and international sales, what state(s) do I need to register in? Would I have to foreign file in the main states I do online sales in? Any help is much appreciated. Your book is great!|
Some states can offer much better conditions for Limited Liability Companies than others. Most web-based companies will file in tax haven states like Nevada or Wyoming. You may only need to register in states you are actually conducting business out of. Most states see a brick and mortar business or you having employees in their state, as doing business in their state.
Here is a link to an article I recently wrote where I go over the benefits of Nevada vs Wyoming for incorporating.
|Q: Hi Jennifer, I'm reading your book with great interest since I have several ideas for starting companies which seem to be a perfect match for an LLC. One scenario that I have a question about though is I'm going to be investing a reasonable amount of money (in addition to providing a loan) in someone else's company to help him out with startup capital. I wasn't sure if it would be appropriate and/or beneficial to create an LLC myself for the purpose of having my company invest in his and holding the loan or just doing this as a personal transaction with his company. By the way his business is in Maryland. What are your thoughts on this? Thanks very much for your time.|
A lot of investors form Limited Liability Companies (LLCs) for the purpose of making investments. They use the LLC to help protect personal assets; this is important especially if the investment involves debt. You may also want to think about filing the LLC in a tax haven state. You can go to our page on Which State to Form LLC to learn more about what state to form your LLC in.
|Q: Hi I currently own 6 rental properties in Texas - could I form a Series LLC in Delaware to protect them or are there advantages in having LLC in Texas ? I believe that I would have to have separate LLCs for each property in Texas - Would I have to pay for 6 x LLC foundations and all costs associated ? I look forward to hearing from you. Best regards Derek Shields|
The formation of a Series LLC as opposed to a standard LLC is very similar with the exception of certain verbiage that needs to be included in your certificate of formation and in some states the company agreement for a Series LLC. While the language is similar in most states, there are minor changes that make a big difference. Most of the time these variations are the cited tax codes and statutory provisions that differ from state to state.
What Businesses Typically Require a Series LLC?
MyLLC.com has professionals standing by ready to assist you will all of your business entity needs. Simply contact us today to get started!
Further information Series LLCsPage updated on 2015-09-28
My LLC.com HIGHLY recommends consulting a lawyer prior to making any changes or decisions regarding your business. The information contained herein should in no way be considered legal or professional advice and in no way constitutes an agreement between the reader and MyLLC.com as a source of professional advice or recommendations.
|Q: If I plan to create an LLC do I need to file a DBA and a resale license first? Are all these steps required?|
There are many components of operating an LLC . However, which aspects are required and which are optional often is the source of confusion for many business owners. One of the commonly asked questions submitted to MyLLC.com is whether a DBA (short for “Doing Business As”) is required as part of a businesses LLC filing.
MyLLC.com highly suggests contacting your legal adviser to garner a complete understanding of DBAs and how and when they are needed. However, we gladly offer the following information to help you understand the basics of DBAs with the understanding that its meant strictly for informational purposes only and in no way constitutes legal or tax advice.
Typically, DBAs are needed if you plan on using a name other than the name of the LLC filed with the state. This does not change the name of the LLC but rather it creates a secondary name that the LLC is permitted to do business under. When applying for a business license, each state requires different information. Once the LLC is filed you can contact your local county's business office to see if your business activity requires it. DBAs are also known as "fictitious names."
There are times when partners of an LLC utilize a DBA when joining business organizations such as networking groups, paying for conferences or business meetings or purchasing office supplies. It's simply a name that is linked to your LLC in order to keep all transactions relating to your business separate from personal finances.
Once you have obtained legal and tax advice from your respective counsel, contact MyLLC.com to assist you in filing for your DBA today!Page updated on 2015-09-30
|Q: In your book you mention getting a corporate kit. Where can I get one?|
Corporate Kits are a great tool for any type of entity. MyLLC.com can you provide you with a customized corporate kit. For more information you can visit the MyLLC.com Corporate Kit page.
|Q: I am currently working my way through the Limited Liability Corporations for Dummies book and I am looking to protect six rental properties that I currently own in San Antonio, Texas. I was interested in a series LLC - is this possible ? and could I organize through myllc.com? FYI ; I am currently located in California.|
Yes Series LLCs can be filed in Texas. Series LLCs are a new entity type allowed in a few states. New isn’t a good thing when it comes to entities types. Series LLCs lack legal precedent. This means their effectiveness hasn’t been tested in a court of law. You should consult with an attorney in Texas if you are considering forming a series LLC. In order to receive any of the benefits of a series LLC, specific information must be included in your articles of organization and your operating agreements, you must also maintain separate records for the assets of each series, as required in the Texas Business Organizations Code. The states office does not have a specific form to be used to form a series LLC. If any series established by the LLC conducts business in Texas under a name other than the legal name of the LLC, the LLC must file an assumed name certificate with the states office.
For more information on business entities for real estate visit our page on Real Estate Investors.
|Q: In the book (LLCs For Dummies) you mention to create a corporation in a tax-free state to create an LLC partnership, what type of corporation is best for that, an S Corporation?|
If you are looking to save on taxes by utilizing a tax haven such as Nevada or Wyoming, then you should use a c-corporation. Otherwise, if you were to do an s-corporation, the profits will flow directly to you and you will end up paying personal taxes according to the tax rate in the state you live in. I hope this helps you!
|Q: If I form a LLC with my husband and my 18 month old child (as a silent partner) -- does this satisfy the multi-member LLC requirement?|
In most states the members of the LLC are required to be a live person over the age of 18. A minor can own an interest in an LLC through a custodianship account or an irrevocable trust. An LLC can own an interest in an LLC. You are going to want to verify with the IRS to see if your minor member is enough to satisfy the requirement. The IRS toll-free business hotline is (800) 829-4933.
|Q: In general, is there a relationship between forming an LLC and the need to obtain a business license? Does one get a business license in the state where the LLC will live?|
This is a difficult question and the best answer is that there is no static answer. Whether or not a business is required to obtain a business license can depend on the specific jurisdiction in which the entity is filed or does business in as well as the type of business being conducted as well as other factors (number of employees, gross income, etc.).
In some states, counties, or cities, you may be required to obtain a business license even if you are only a sole-proprietor without a corporation or LLC. Sometimes one county in the a state will require a license and another one will not.
I wish i could provide a more specific answer for you, but there are literally thousands of possible licenses in different jurisdictions. Additionally, often there are a myriad of different exemptions for certain businesses or industries, for example some jurisdictions do not require film production companies to obtain business licenses as an incentive to promote filming in their jurisdictions.
I'm sorry I can't provide a more specific answer that would be under 10,000 pages. The best way to get the answer to your question is to contact the local tax authority in the jurisdiction where you conduct business and ask them what the licensing requirements are for your type of business!
|Q: I bought your book and have formed my own LLC using it. I am using Quicken 2008 Home and Small Business and have tried to find a book to help explain posting and reimbursement of personal expenses. Can you recommend a book?|
Unfortunately, to my knowledge there aren't any great books on business taxes as most business owners just use accountants. It is for this reason that I am currently encouraging Wiley to do a "Business Taxes for Dummies". ;-) In the meantime, if you have a specific question, I may be able to help you out.
|Q: My husband has started doing some contract work training Emergency Medical Service Providers...he is licensed and works full time as a firefighter. The companies are giving him 1099s, and as LLCs themselves they are not wanting to put him on payroll. I know we need to do something in order to validate the extra income and an LLC is the way we were told to go. It will be a single LLC, since we will not benefit from me being a member. Is an LLC the right thing? After reading Limited Liability Companies for Dummies, I am a little nervous, but I don't want to start recruiting members. This is great money, more than our salaries put together, but I want to do it correctly! Thank you!|
When your LLC has only one member, it’s called a single-member LLC. Single-member LLCs are treated as disregarded entities by the IRS as discussed in The Skinny on Single Member LLCs. When LLCs came into existence, they were intended to be treated as partnerships. Just because you have a single member LLC this does not mean you don’t have options. You can still make a tax election, you just can’t elect partnership taxation. If you want to be subject to corporate taxation, simply file form 8832, Entity classification election (within 75 days of your formation date. From there, you can either pay taxes as a corporation or elect S-corporation taxation, by filing form 253 with the IRS.
To keep the liability protection in your single member LLC remember the following:
|Q: In your book you talk about the advantage of forming your LLC, if you're an internet based business, in another state such as Nevada due to the "no personal income". I'm slightly confused about how this exactly works. As far as I understand it, LLCs are taxed as pass-through so any e-taxable profits are assigned to the owners as personal income. So if I live in Virginia but my LLC is formed in Nevada, how would this exactly work? Wouldn't the earnings from the LLC get passed through to me, living in VA, and then I have to pay the taxes in VA? If so, how exactly would the no taxes in Nevada help me save some money? Thank you for your time. I know it's kind of a long question but, as I'm sure you know, trying to figure out and decide what business to form, and where, is kind of nerve racking. Your book has been a great help, I'm just confused by this one point.|
Great question! You are right that the profits would pass on to you and you would end up paying Virginia taxes anyway... unless you have elected corporate taxation. Your LLC is not required to have pass-through taxation and by electing corporate taxation, you are allowed to keep your profits in the LLC. The profits you keep in the LLC will be taxed at the federal corporate tax rate. In addition, you will also be required to pay state taxes. However, by forming your LLC in a tax-free state (such as Nevada), you can eliminate any possibility of state taxes being assessed on the profits you keep in your company.
I hope this answers your question... If you need help in forming your LLC or electing a tax status, please don't hesitate to contact me or my associates at MyLLC.com!
|Q: Hi Jennifer, I live in North Carolina and am in the midst of starting an subscription-based internet business (nationwide) with no employees, I would like to form an LLC in Nevada, I know I will need a Registered Agent there, my question is, aside from the annual Registered Agent fee, what else can I expect to pay Nevada for the LLC? and what kind of taxes/forms do I have to file. Thank you in advance Ang|
In Nevada there is a $125 Initial List of officers due the last day of the month following filing. On an on going basis you will need to file an Annual List of Officers in Nevada, due on the last day of each anniversary month thereafter. There are no business or franchise taxes in Nevada, however, a business license fee of $200.
You will also need a Registered Agent in Nevada for your LLC. A registered agent's primary duties are to have an address in the state that is not a P.O. box and to be available during normal business hours, in the event your company is sued and paperwork needs to be served. In some states you can act as your own registered agent . However, I could fill about five pages with reasons why this isn’t a good idea. For more information on registered agent service visit the MyLLC Nevada registered agent page.
|Q: You mentioned in "LLCs For Dummies" that you are against single member LLCs and suggest getting a friend to be a member with a small share. You do not mention family members as additional LLC members to get around the liability hole. Please explain.|
MyLLC.com literally write the book on "LLC's For Dummies" and has long been considered the leading authority in providing information regarding forming LLC's as well as other types of business entities and assisting individuals in achieving their goals of forming their own companies . We are often asked about single-member LLC's and whether adding family members or spouses changes your status. While we strongly suggest addressing any questions you have regarding your business with your tax adviser, the following information provides our general thoughts on the subject.
LLC's offer your business multiple levels of protection while guarding your personal assets from lawsuits as well as IRS fines and penalties. There are a host of reasons why forming an LLC is a smart business move as well as being one of the best ways to protect the business you are working so hard to build. However, should you choose to operate as a single-member LLC or sole proprietorship you are leaving yourself totally vulnerable. It is because of this lack of protection that MyLLC.com strongly advises that you consult your tax adviser before making any decisions regarding your business and your filing status.
MyLLC.com is often asked if adding a spouse or family member as opposed to actual business partners is a way around forming a traditional LLC. These are dangerous waters to tread. The IRS as well as the courts considers your spouse as one member and not an additional partner. However, you can select a relative or even a child as a partner without creating any issues. Partners are not required to ACTIVELY manage the LLC and you can maintain total control by setting up your LLC to be manager-managed and select yourself as the sole manager. This provides you then with the protection an LLC offers while still allowing you to maintain complete control of your business.
MyLLC.com has highly experienced experts standing by to assist you should you decide to change your filing status from a sole-proprietorship to an LLC. Contact us today to get started!Updated 2015-10-26
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What is your first step? Simply choose which of the following two options applies to your business:ALREADY INCORPORATED in the state of Nevada? 2015/08/15 - Your annual fees increased from $325 to $650, and that’s not including the Commerce Tax if it applies to your business! Further, you will now be required to file your tax return with the NV Department of Taxation with June 30th as the fiscal year, not the calendar year! Review these changes with your tax advisor immediately! If you choose to re-domicile your corporation in another state, MyLLC will file the re-domestication paperwork for you!
MyLLC is committed to assisting you in this process but you must contact us today!Call us toll free at 888.88.MYLLC or fill out the contact form so one of our experts can help you.