Setting up a Limited Liability Company
Posted by Goody on 06/30/08 in Finance
Both sole proprietors and partnerships can convert to a limited liability company. Until recently some states did not allow one-member LLCs. This is no longer the case. One-member LLCs are allowed in every state.
Both sole proprietors and partnerships can convert to a limited liability company. Owners of LLCs are called members, not shareholders.
Until recently some states did not allow one-member LLCs . This is no longer the case. One-member LLCs are allowed in every state.
LLCs are set up by filing articles of organization with your Secretary of State and paying a fee. Fees vary from state to state. They could be as low as $50 or over $500.
Key Points - LLC Tax Advantages
- Every LLC must also have a registered agent. This to provide a physical address where it can receive tax notices and legal documents.
- Every LLC should have an operating agreement. This is not a requirement.
- You can either set up your LLC yourself , for example by using one of the various books. There are also websites that will do everything for you for a fee.
- For example mycorporation.com charges from $150 plus state fees.
Apart from having different fees each state has different rules for LLC formations. Some states such as New York require that LLCs publish a notice of formation in a local newspaper. This could cost over $200.
By default LLC tax deductions are taxed as sole proprietorships or partnerships. This means a one-member LLC is taxed in exactly the same way as a sole proprietor and must complete Schedule C. An LLC with more than one member is taxed like a partnership and must complete Form 1065.
An LLC can also opt to be taxed like a corporation. You can then receive fringe benefits as an owner-employee and not have to pay tax as long as you meet the IRS guidelines.
Often it’s best to have the LLC tax deductions taxed as a sole proprietor or part proprietor in the early years when profits are small or there are losses. Later on it may be better to elect for s-corporation or c-corporation tax treatment.
About the author
You’ll find more information on LLC Tax Advantages and LLC Tax Deductions on Taxcafe.com
Tags: articles of organization, form 1065, fringe benefits, irs guidelines, legal documents, limited liability company, llc formations, losses, operating agreement, partnerships, physical address, profits, registered agent, schedule c, secretary of state, shareholders, sole proprietor, sole proprietors, sole proprietorships, tax deductions
tag this
Post a Comment