Setting up an LLC?

Discussion in 'The Pub' started by McStrats, Jul 6, 2019.

  1. McStrats

    McStrats Member

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    Has anyone done this? I set one up through Legal Zoom a few years ago and it was about $300. Just wondering if there is a more cost effective way?
     
  2. A-Bone

    A-Bone Montonero, MOY, Multitudes Gold Supporting Member

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    More cost effective than only $300 to set up a legal entity that potentially shields someone from personal liability while facilitating the pass-through tax structure of a sole proprietorship?
     
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  3. Redub

    Redub Supporting Member

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    In many states, you simply do it through a state gov web page. It's probably about the same cost in many cases though. $300 is approximately what I've always paid direct to whatever state I've established one in.
     
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  4. McStrats

    McStrats Member

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    Thanks for the responses. I remember now why I used LZ last time.
     
  5. Last Nerve

    Last Nerve Supporting Member

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    Companies that set up entities for others make a lot of money, IME.
    Whether a CPA or Legal Zoom or whatever.
    The costs differs a bit state-to-state but the process is almost exactly the same.

    Here in CO-
    I would visit my Secretary of State website and find the Business section.
    Search for the name to make certain it isn't already taken.
    Register the business, which really is inputting data about the business and ownership.
    Pay the associated costs. For an LLC here in CO, it is $150 to register, IIRC.
    Save that registration PDF to your computer. Some states business registration is public, others it is not. You'll need that proof and filing number for deposit accounts at any financial institution.
    Next, and IME more importantly, visit the irs.gov website, which is closed on the weekends and obtain an EIN. Employer Identification Number. The SSN for your business. This helps further distance the liability of a company from its owner(s), which is usually the main reasoning behind LLC creation in the first place. You'll see steps for Obtain an EIN on the main page. Follow those easy steps of inputting the data and you'll finish with a PDF of your EIN. Again, save that to your computer as THE ONLY WAY TO OBTAIN AN EIN AFTER FILING is to call the IRS. That's an average of about four hours on hold. I would print and save the PDF in case your computer ever crashes.
    Another step, IMO, that's not required but strongly suggested is to draft an Operating Agreement or Company Bylaws. They don't have to be extensive, but you'd like to further specify the relationship between the LLC and yourself and to have clear ownership designation to protect yourself in the future. Templates can be found online. Find one you're familiar with.
    One last comment would be to pay yourself regularly and do not pay personal bills directly from the LLC's bank account. You are owner of the LLC and can transact on the behalf of the company, but the funds belong to the LLC. I've seen transactions mitigated to show no real separation between owner and company and it opens the door to personal belongings should some litigation get really complex or vindictive. Obtain a business credit card for purchases for the business. Obtain lending for the business. If there's a vehicle needed, obtain a loan and title/register it under the business.

    But directly answering your question, you could put maybe two hours into it and have everything completed just as Legal Zoom would do, albeit not in a super nice folder. Registration costs do differ state to state, but those companies calculate depending on those state fees, so the profit margin for them is the same. As I mentioned, CO is $150 but some other states, can't really which, can be around $300.

    Hope that helps.
     
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  6. Teleplayer

    Teleplayer New Mods On The Block Staff Member Gold Supporting Member

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    To do things properly, you should indeed have an operating agreement, company bylaws, member's agreement and - by all means - records of minutes. ALways be certain to file annual reports and any other paperwork/licening/etc. required locally and by your state on an annual (or other) basis.

    And make sure you file annual tax returns for both the LLC and personally. Also make certain your accountant understands differences between distributions from the LLC and income.

    Lastly, the "corporate veil" can often be pierced. And while an LLC provides an extra layer of protection legally, it isn't perfect (or close to it).
     
  7. sundog964

    sundog964 Supporting Member

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    What he said. Once you start mixing personal and company money you effectively lose the LlC protection. A lot of my friends use their businesses to pay for a lot of personal expenses, and if they get sued, they will lose the protection.
     
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  8. Jon C

    Jon C Silver Supporting Member

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    I did it in VA for nothing, it’s a $50 annual fee iirc. For any significant business, consult a lawyer or risk your assumptions blowing up.

    Do not commingle personal and business, as noted above.
     
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  9. Last Nerve

    Last Nerve Supporting Member

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    Absolutely, 100%, file separate business and personal returns.
    I'm not a big fan of 'Schedule C' business income on a personal return.
     
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  10. Jon C

    Jon C Silver Supporting Member

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    ...audit bait... :aok
     
  11. Redub

    Redub Supporting Member

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    Serious question though, is using a Schedule C not the required way to file? If one has a single member LLC, there are returns for the business but the income flows to schedule C. I'm pretty sure that is the law IF it's a single member LLC, but would appreciate knowing if it's not the case.
     
  12. Last Nerve

    Last Nerve Supporting Member

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    Have to preface that I, myself, am not qualified to give legal/tax advice, but I do not believe it is law to file under Sch C.
    However a single member LLC, IMO, should still obtain an EIN, and therefore file business taxes in their entirety.
     
  13. Omega

    Omega Member

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    Single member LLC files a schedule C on personal return. Other filing options for LLC are partnership return or 1120 C Corporation. There is no such thing as an LLC tax return.
     
  14. Benz2112

    Benz2112 Supporting Member

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    Just do it yourself, and then just pay 10x more when something happens and you need an accountant or an attorney to fix what you screwed up.
     

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