Why is a LLC is important for your business?

Question

Where do you go in your county to apply for a LLC.?A LLC has so many tax advantages for your business. So why doesn't everyone? Even as a wholesaler you need advantages.

Account Closed · Answer

David, I'm going to disagree with you on this one.An LLC does not protect you from litigation. If someone is going to sue you, it doesn't matter if you are operating as a sole proprietor, LLC, S-Corp, Partnership or Corp. The bottom line is, they're going to sue you. Litigation is litigation.With relation to tax advantages - it can go both ways....A Single Member LLC isn't going to provide you with any tax advantages. In fact, it will provide you with tax disadvantages if you consider state and local taxes (such as occupation taxes like we have in various Colorado municipalities or even Business & Occupation taxes in jurisdictions like Washington or Gross Receipts taxes in jurisdictions like New Mexico, Hawaii, etc., etc.)An S-Corp is going to create complications in the form of local taxes as mentioned above as well as "reasonable compensation" issues and payroll taxes.A C-Corp is going to create complications as mentioned in both instances above on top of personal holding company issues if applicable.The bottom line is, everyone's situation is unique and they need to discuss that personally and confidentially with their attorney.As a person that owns a single member llc, which is owned by another single member llc...if I see a great deal in Texas, I'm looking at an immediate ~$1,000 tack on overhead cost for foreign business registration fees plus additional expenses for filing another state return and additional accounting costs. As an individual, I could buy that property in Texas and add it to my umbrella policy and be good to go.It all depends on each individual's unique situation.

Bill Dickson · Answer

thanks Ed.... i need to talk to a CPA and a attorney.. i just didn't want to get in a jam bout this ,but as you said each person's situation is different. Thank you and thanks to all for your advise. I do appreciate it.

Linda Weygant · Answer

Was just about to say the same thing.A straight LLC does absolutely nothing for your taxes. An LLC is a straight play for liability protection. Let me explain.If you own rental properties by yourself in your own name, you report everything on Schedule E.If you own rental properties in a single member LLC, you report everything on Schedule E. Literally the only difference is that you add the expense of registering and maintaining the LLC. There isn't even a spot on the Schedule E to add the name of the LLC or its EIN.If you run a sole proprietorship business (agent, flipper, whatever), you report everything on Schedule C.If you run a single member LLC business, you report everything on Schedule C. This schedule does have a spot for the name and EIN of the LLC, but again, the only actual tax difference is that you have the extra expense of registering and maintaining the LLC.If you run any kind of business with more than one partner, it is reported on a Form 1065. The only difference if you are an LLC is that you check a little box that says you're an LLC instead of a traditional partnership.The major difference is if your LLC elects S-Corp status. NOW we're talking some major differences. But it's no different than if your C-Corp elects S-Status. Your LLC goes from a 1065 to an 1120-S. Your C-Corp goes from an 1120 to an 1120-S.There is literally no tax issue that an LLC solves for you. There is no additional write-offs that you get, nothing special you do, no hidden tip or trick that exists in an LLC that exists nowhere else.

Steve B. · Answer

"A llc has so many tax advantages" Still trying to figure out who the guru is selling noobs on this cockamamie malarkey

David Dachtera · Answer

@Bill Dickson,@Ed E. is partly right. Business entities and entity structures complicate things, but they help protect you from litigation and provide unique tax advantages if they are set up properly.Most LegalZoom, etc. and DIY entities don't pass muster when challenged in court.Do it right or don't do it. If you're not a legal / tax professional, hire it out."Control everything, own nothing'.

David Dachtera · Answer

Well, again, Account Closed, you're partly right.An LLC alone has fewer advantages than an LLC as part of business entity structure. Likewise, an S-Corp. C-Corp's have special considerations and should be weighed carefully to make sure they are appropriate to your purposes.It is essential to take a comprehensive view of your business entity plan. There are advantages in that structure which are more available than they are without it or with a single entity.The entire explanation is well beyond the scope of what can be expressed in a forum post or series of posts. In the education to which I am connected, it's a two-day class - 16 hours of on-line class time recorded over the course of two calendar days. Also, I am not a financial or legal professional. So, I'll leave all that to the pros.

Christopher Phillips · Answer

@Bill DicksonYou can setup an LLC in a few minutes and for a few dollars online.Account Closed is correct that you should speak with a CPA and a Lawyer first. Tax advantages depends on what you're doing and if you get the correct setup. The website like LegalZoom or INCFILE can do this for a fee, but they don't provide legal advice. Just the ease of setup.

Account Closed · Answer

The County has nothing to do with LLC entity formation. In Colorado, you do this through your Secretary of State.An LLC can complicate things, or it can shield you from litigation. It isn't always the right answer for everyone - talking to a CPA and an Attorney will get you the right answer for you.

Ron C. · Answer

Great post! @Linda Weygant

Caleb Heimsoth · Answer

I've talked to a CPA and lawyer about this recently and they think an LLC is the way to go.