To "LLC" or not to "LLC" ???

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RoyGBiv
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Re: To "LLC" or not to "LLC" ???

Post by RoyGBiv »

JALLEN wrote:
wgoforth wrote:
The Annoyed Man wrote:
wgoforth wrote:
The Annoyed Man wrote:I eventually converted from a sole prop to an LLC on the advice of my CPA, with one real goal in mind.....making my exit strategy cleaner whenever I decide to really retire. Having the LLC behind the name makes the business easier to sell/transfer ownership, according to what he told me. The downside is that my tax picture has been more complicated....not so much from amount paid, but in the reporting requirements. Given that my business does not have that much value in terms of capital assets, size of bank accounts, or the size of my customer base, and given that neither my wife nor son have much interest in owning this business if I shuffle off this mortal coil, I am rethinking whether or not the change was worth it.
My understanding was the LLC did not change tax reporting as it is pass through to your personal taxes. Have you found this otherwise?
There is reporting necessary to the state.......I forget if it's the Sec State office, or the Franchise tax board. Also, LLC places a greater requirement to not commingle funds......at least this is what I have been advised. But understand, I'm not an expert. I'm only telling you what my experience has been, and what advice I was given. I have to rely on the wisdom of others in this area.
There is no state tax if the service is instruction only, as in the case of CHL instructors. I'm not an expert either, but as I searched all material I read stated the LLC is the simplest tax wise, as it passes through to your personal returns. Can any one can clarify this?
The LLC prepares and files information returns with IRS, I believe. No taxes as the tax is paid by the owners personally on their returns. As far as formalities go, there is the operating agreement, even in a single member LLC, the need to keep separate bank accounts, books, etc, and don't fudge on this. Of course, in CA, the LLC has to pay state income taxes, minimum $800 a year whether you made any money or not, or even did any business. Thankfully Texas doesn't have that dampening requirement.
Within the first 90 days (??) of forming the LLC you should (if your tax advisor agrees) file a form 2553 (DETAILS) and select to be treated as a subchapter-S corporation for Federal tax purposes. This election would cause all the profits to roll down into the owners (could be multiple owners) personal tax returns. If you have multiple owners you could choose to file a proprietorship federal return and allocate specific monies (profits or losses) to each individual shareholder via a Schedule K-1.... It sounds more difficult than it is.... If your business is relatively uncomplicated (no subsidiaries, not taking any fancy credits for weird stuff like solar power, etc), H&R Block TaxCut or Quicken have business tax software you could use for less than $100/year, vs an accountant at >10x that fee.

If you can do your own taxes, you can do your own business taxes, IMO. You might need some help the first time, but, it's not that complicated.
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JALLEN
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Re: To "LLC" or not to "LLC" ???

Post by JALLEN »

I'm the 17th reason to use H&R Block when it comes to tax preparation. I solved my tax reporting issues many years ago, at my mother's suggestion. Back then, I was CEO and director of about a dozen small corporations, in various ownership positions. My own taxes were already driving me nuts. I dreaded every step of the process, almost to the point of a phobia or something.

My mother said why don't I have my little brother do them? He's a CPA, does taxes etc for a living, etc. This was inspiration! Not only is all that true, he is very good at it, and if he messes up, I can rat him out to Mom, and he hates that! End of problem! :thumbs2:

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AlaskanInTexas
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Re: To "LLC" or not to "LLC" ???

Post by AlaskanInTexas »

My advice as a former CPA and current tax attorney: put as much stock into the advice you have just received as you would a reloading recipe on a tax forum.
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Re: To "LLC" or not to "LLC" ???

Post by bizarrenormality »

Bullitt wrote:If you are looking for liability protection from a lawsuit, you won't get it with an LLC. You can be sued directly as the instructor.
If that's your professional legal opinion, please explain why Texas Government Code §411.208 doesn't apply.
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Re: To "LLC" or not to "LLC" ???

Post by Jumping Frog »

JALLEN wrote:It's true that an LLC limits liability to the assets of the business, for liabilities of the business, but they offer really nothing for liabilities of the owner of the business who commits the tort, etc.

Here is an example. You have your business, "My Bakery, LLC." It has assets, few liabilities, decent capital, and is a successful business operation. One day, you are driving the delivery truck with a load of fresh rolls for the restaurant your good customer, and run a red light in your haste. The damages from the collision far exceed the liability limits of the insurance policy for the truck, and even the assets of the LLC. You were solely at fault for the result.
You are mixing apples and oranges here.

If you are personally driving a vehicle and cause a bad accident, it doesn't matter whether you are a sole-proprietor, own an LLC, an employee of a different company, or own stock in Government Motors. You are still getting sued personally for your personal actions. Liability for your personal actions applies regardless of your business form.

However, if you are employing your brother-in-law and he hits someone, then it matters a great deal whether he is working personally for you or working for the LLC.
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Neverpanic1
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Re: To "LLC" or not to "LLC" ???

Post by Neverpanic1 »

Any thoughts or benefits of using LegalZoom (or the like) to file an LLC ?
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The_Busy_Mom
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Re: To "LLC" or not to "LLC" ???

Post by The_Busy_Mom »

It really is very simple to do yourself. You need to search the Secretary of State (SOS) records to make sure your company name is available, and then reserve it. Google for sample 'Articles of Organization' - very easy to do. File with the SOS, and then file with the IRS for an Employer Identification Number. If you are going to use an assumed name, you'll need to file an assumed name certificate with the county in which you are doing business. If you are going to be selling any products, you'll need to contact the Comptroller's office and get a sales tax ID. It just takes time. If you have the money, and your time might be more valuable spent in other matters, then hire out an accountant to do the work. An accountant is just going to have his assistant to do the leg work. The SOS filing is the only thing that will cost you money ($300 for the filing and like $1 per search for your name). And an assumed name certificate will cost you a filing fee that varies by county. I think Tarrant County was $25.

In addition to the LLC, the next most important thing is to make sure you have insurance!! If you form an LLC, and then use the NRA insurance, your business is covered, including you and your employees. It's very cheap ($400 per year for their maximum coverage). When I go to the range to teach a class, I know that I am covered if something goes horribly wrong.

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Re: To "LLC" or not to "LLC" ???

Post by rotor »

I think the real value of a LLC is when there is more than one person involved. Let's say you have an instructor business and you are in partnership with another instructor. He gets sued as part of the business but he has no money, they go after you as the partner. If you were an LLC and the "partner" was sued, you would be an employee of the LLC and they could get the assets of the LLC and your "partner" ( of course he is not really a partner but an employee, just like you) and your personal assets can't be touched. If you are solo and an LLC, you are an employee of the LLC and they can still wipe you out in a suit. So, my feeling is that unless you are trying to shield yourself from the actions of another (eg a partner) that this may not be what you want and will end up costing more in accounting fees. Look at a solo doctor, usually a PA (prof association). The doc is an employee of the corporation and he can still be sued for all he is worth, Now if there are two employees (or more) docs in a group practice than if one doc is sued the other doc can not be held personally responsible (unless he too is being sued). The final thing is that if you are raking in the dough big time in a LLC you will be hit with the state business tax. I can't imagine a solo instructor making that much but perhaps some do. If there are a bunch of instructors in a LLC business you might hit the business tax issue. If I were in business with another person though and the choice was partner or LLC I would go with the LLC.
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RoyGBiv
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Re: To "LLC" or not to "LLC" ???

Post by RoyGBiv »

Youre shielding yourself from the unknown.
Its better than insurance, but still not a guarantee.
I am not a lawyer. This is NOT legal advice.!
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oohrah
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Re: To "LLC" or not to "LLC" ???

Post by oohrah »

wgoforth - trademarking is tricky, usually requires a lawyer to be sure. you can trademark a computer business with the name Apple, but you cannot trademark a fruit business by the same name. You also cannot start your own computer business called Golden Delicious because it would infringe on Apple. In your example, you could name your business Castle Keep Guns because it has nothing to do with castles or architecture. However, if someone with a similar type business is already doing it under a "castle" name, and your new business name could confuse the public as to brand identity, you lose out. IANAL but I have had to take several courses on this subject.
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Skiprr
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Re: To "LLC" or not to "LLC" ???

Post by Skiprr »

I respect that you have taken courses on the subject, but I have actually registered several federal trademarks.
oohrah wrote:wgoforth - trademarking is tricky, usually requires a lawyer to be sure.
Not true. The application process takes significant time, but it isn't expensive. And it does not require an attorney. If your application is denied, you will be told, explicitly, why. And you can apply again.
oohrah wrote:You also cannot start your own computer business called Golden Delicious because it would infringe on Apple.
Seriously? Can you provide us legal references or case studies?

For most CHL businesses the value of a registered trademark is nada.

In fact, the value of any registered trademark is slim: you have to be willing to sue (and bear costs incurred) to enforce it.
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oohrah
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Re: To "LLC" or not to "LLC" ???

Post by oohrah »

Agreed. A lawyer is not necessary, but if you want thorough protection, especially internationally, it is recommended. Some trademarks are inherently weak, some very strong. As to your question, Apple has a product called Macintosh. They established a pattern of naming products after apple types, which prevents future competitors from copying their practice. The judgment is based on whether the public could be confused. This is a classic example. You could however open an Apple Guns store (assuming no one else has of course).
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Re: To "LLC" or not to "LLC" ???

Post by wgoforth »

oohrah wrote:wgoforth - trademarking is tricky, usually requires a lawyer to be sure. you can trademark a computer business with the name Apple, but you cannot trademark a fruit business by the same name. You also cannot start your own computer business called Golden Delicious because it would infringe on Apple. In your example, you could name your business Castle Keep Guns because it has nothing to do with castles or architecture. However, if someone with a similar type business is already doing it under a "castle" name, and your new business name could confuse the public as to brand identity, you lose out. IANAL but I have had to take several courses on this subject.
This had nothing to do with trademarking?? Nor was the Sec of State saying I couldn't use the name.... I can. Just can't use it for the LLC. In fact, I could get LLC under "Castle Enterprises" then Do Business As Castle Keep Services. None of which requires a lawyer.
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Bullitt
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Re: To "LLC" or not to "LLC" ???

Post by Bullitt »

Jumping Frog wrote:...Liability for your personal actions applies regardless of your business form...
This is correct, which is why for a 1-man sole proprietorship, LLC will not give you liability protection.
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Re: To "LLC" or not to "LLC" ???

Post by Jumping Frog »

Bullitt wrote:
Jumping Frog wrote:...Liability for your personal actions applies regardless of your business form...
This is correct, which is why for a 1-man sole proprietorship, LLC will not give you liability protection.
It will give you liability protection for injuries that are not caused by you. For example, your business burns and ignites the business next to you. A student during class shoots a different student. There are business liabilities that are not a direct results of the owner's negligent acts.
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