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Tell me about an LLC


Duchess Jack
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I am considering starting a production company and have decided that creating an LLC to be the best way for me to do this. I was/am going to do this on Legal Zoom

 

From what I can tell, I can make myself the soul owner of the LLC for tax purposes and an LLC can protect me to a certain degree if things don't go well.

 

Are there any downsides?

 

Is it a bad idea to use my home address or is it best to get a PO Box?

Edited by Duchess Jack
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Is it a bad idea to use my home address or is it best to get a PO Box?

 

Do not associate anything, if possible, with your home or your social security number. If sh*t hits the fan, the last thing you want is someone suing you and having the opportunity to go after your house.

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I am considering starting a production company and have decided that creating an LLC to be the best way for me to do this. I was/am going to do this on Legal Zoom

 

From what I can tell, I can make myself the soul owner of the LLC for tax purposes and an LLC can protect me to a certain degree if things don't go well.

 

Are there any downsides?

 

Is it a bad idea to use my home address or is it best to get a PO Box?

 

An LLC can take on many characteristics with regard to taxation as an LLC can be an S/C corp or many other designations for tax purposes.

 

If the LLC is set up properly and you do not comingle your private money into corporate monies the address doesn't matter. Actually if you play it correctly you can pay yourself rent for using your home as an office.

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As for what an LLC offers, this will give you some good insight: http://en.wikipedia.org/wiki/Limited_liability_company

Funny. I have that page open right now.

 

Alright. I was worried about this, but it seems like the best thing for me to do is open a PO Box before I start this, right?

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hmmmm...

 

It looks like even if I do get a PO Box, I need to list a "registered agent" which cannot be a PO Box.

 

Legal Zoom will provide this as a service for $159.00. Is this right right way to go? Anybody know how folk might do this otherwise? Do folk typically use their lawyer?

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hmmmm...

 

It looks like even if I do get a PO Box, I need to list a "registered agent" which cannot be a PO Box.

 

Legal Zoom will provide this as a service for $159.00. Is this right right way to go? Anybody know how folk might do this otherwise? Do folk typically use their lawyer?

 

You can use your lawyer, if you would like.

 

I wouldn't worry about the whole house vs. P.O. Box thingy.

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An LLC can take on many characteristics with regard to taxation as an LLC can be an S/C corp or many other designations for tax purposes.

 

If the LLC is set up properly and you do not comingle your private money into corporate monies the address doesn't matter. Actually if you play it correctly you can pay yourself rent for using your home as an office.

 

I've actually wondered why I don't simply form 'Deathpig LLC'. Then, I can have Deathpig LLC contract my services to my current employer at a rate less than my current encumbered cost. Deathpig LLC can handle my travel, lodging, and health care (and maybe some per diem for lunches) as a cost of business (and, as a business, it can write off more of these expenses than I can as an individual).

 

I can make more money gross than I can write now, and pay less in taxes than I do right now, and cost my current employer less than he's already allocated for me than I am right now. Everyone wins!

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I've actually wondered why I don't simply form 'Deathpig LLC'. Then, I can have Deathpig LLC contract my services to my current employer at a rate less than my current encumbered cost. Deathpig LLC can handle my travel, lodging, and health care (and maybe some per diem for lunches) as a cost of business (and, as a business, it can write off more of these expenses than I can as an individual).

 

I can make more money gross than I can write now, and pay less in taxes than I do right now, and cost my current employer less than he's already allocated for me than I am right now. Everyone wins!

I believe this has been tried, to no avail.

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hmmmm...

 

It looks like even if I do get a PO Box, I need to list a "registered agent" which cannot be a PO Box.

 

Legal Zoom will provide this as a service for $159.00. Is this right right way to go? Anybody know how folk might do this otherwise? Do folk typically use their lawyer?

Legal Zoom will help you with the paperwork, but I'm not sure you will get much else from them. I would think an attorney would be able to advise you about the process, for not much more than $159, if not for the same amount.

 

A registered agent is required so that if someone sues your LLC, the agent is the one served with process.

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sweet. thanks guys.

 

some other questions.

 

is there any reason to have Officers? If I go this route, would I need all the typical officers CEO, CFO, ETC

 

it looks like I can run this as the sole owner and pay taxes on it when I pay my personal income taxes. If I have losses (eg ther $800 this'll cost through legal zoom or the cost of a website) can it offset my personal taxes?

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sweet. thanks guys.

 

some other questions.

 

is there any reason to have Officers? If I go this route, would I need all the typical officers CEO, CFO, ETC

 

it looks like I can run this as the sole owner and pay taxes on it when I pay my personal income taxes. If I have losses (eg ther $800 this'll cost through legal zoom or the cost of a website) can it offset my personal taxes?

First of all, the characteristics of an LLC in your state may differ. A lawyer would know any particulars, but it likely resembles the uniform limited liability company act. An LLC can be "member managed" or "manager managed." In a member managed LLC, the members make decisions for the LLC and resemble partners in a partnership. In a "manager managed" LLC, managers have authority similar to officers in a corporation. In that case, the members(owners, in this case you) represent the ownership, but not necessarily the day-to-day authority. The degree of member liability varies depending on which you choose.

 

As I recall, LLC losses can only offset LLC gains, not personal income that does not derive from the LLC.

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sweet. thanks guys.

 

some other questions.

 

is there any reason to have Officers? If I go this route, would I need all the typical officers CEO, CFO, ETC

 

it looks like I can run this as the sole owner and pay taxes on it when I pay my personal income taxes. If I have losses (eg ther $800 this'll cost through legal zoom or the cost of a website) can it offset my personal taxes?

If you are a single member LLC then there is not a separate return to file for the LLC. You will file the activity on schedule C of your personal return. When filling out schedule C there will be a place for you to put the LLC name and tax identification number. You don't have to have a tax identification number for the LLC if you are the only member but it is recommended for liability purposes.

Also, losses from the LLC can be taken against your regular income (W2 etc) as long as you have active participation in the LLC and assuming you have basis to take the loss.

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1. I am considering starting a production company and have decided that creating an LLC to be the best way for me to do this.

 

2. I was/am going to do this on Legal Zoom

 

3. From what I can tell, I can make myself the soul owner of the LLC for tax purposes and an LLC can protect me to a certain degree if things don't go well.

 

4. Are there any downsides?

 

5. Is it a bad idea to use my home address or is it best to get a PO Box?

1. Probably.

 

2. If you're on a budget, so be it. But I'd advise hiring a lawyer if you can afford to. Our office charges about $2,000, which is probably on the "expensive" side. (I don't want your work, just trying to give you some sense of relativism if you shop around).

 

3. They don't call it a "limited liability" company for nothing. That said, people screw up formation and operations all the time trying to do it themselves in ways that make the limited liability worthless. A good lawyer will help guide you with that - LegalZoom will not, which is why they're cheaper.

 

4. From a federal income tax perspective, not really. But you may incur state franchise taxes and need to respect certain formalities if you want the limited liability to work. There may be other state law requirements/compliance in your jurisdiction. See recommendation for lawyer, above.

 

5. From a tax/liability perspective it doesn't matter, assuming you're running a legitimate business. But it will make it easier for people to find out where you live, if privacy is a concern.

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If you are a single member LLC then there is not a separate return to file for the LLC. You will file the activity on schedule C of your personal return. When filling out schedule C there will be a place for you to put the LLC name and tax identification number. You don't have to have a tax identification number for the LLC if you are the only member but it is recommended for liability purposes.

Also, losses from the LLC can be taken against your regular income (W2 etc) as long as you have active participation in the LLC and assuming you have basis to take the loss.

Sums it up nicely on how the IRS views you and I highly recommend getting a tax ID number and a separate bank account. Keeps everything separate from your personal affairs.

 

I've formed LLC's and S corporations - all have their pros and cons.

 

Screw those websites on setup, get a lawyer to set it up correctly.

Edited by twiley
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Sums it up nicely on how the IRS views you and I highly recommend getting a tax ID number and a separate bank account. Keeps everything separate from your personal affairs.

 

I've formed LLC's and S corporations - all have their pros and cons.

 

Screw those websites on setup, get a lawyer to set it up correctly.

 

This is wisdom.

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My experience fwiw:

 

I formed an LLC. I did not use a website or lawyer. My state (New Hampshire) allows for the formation of the LLC by filling out an online form on their website. Your state may require more or less paperwork, or you may want someone or some 3rd party site to guide you. In NH it was $100 to file. An annual report is required, which was $102 this year.

 

After forming the LLC I got an EIN (online & $50 iirc) and opened my bank account for the LLC. The bank asked for an operating agreement document. You can go online and see enough examples to figure out what to put in it, or have someone or some service you find on the web do it.

 

Then I retained the services of a tax accountant to make sure I did everything correctly. If I were to do it all over again, I'd do this 1st. He advised me to file my taxes as an S-Corp. Sorry, I don't remember the details of why it would be better for me. He's the expert and once the decision was made I really didn't think about it again. He produced the paperwork, I signed, done. FYI, the decision to file as an S-Corp is supposed to be done pretty soon after forming your LLC. I find it's good to have him to ask tax related questions once in a while.

 

I also hooked up with a local employee leasing company and signed on as an employee with them. This costs a little bit, but going through them eliminates payroll headaches and takes care of workers comp, unemployment insurance, provides access to health insurance, 401k etc. I have a full time contracting gig with a small company. So, what happens is; my LLC bills the company where I work, the employee leasing company bills my LLC, the employee leasing company pays me my salary. I think this arrangement was also beneficial last year when I refinanced my house, as I didn't have to say I was self-employed.

 

I did an Excel spreadsheet to calculate what I needed to bill per hour based on what salary I would probably be looking at as an employee. If you would like to see it. PM me your email address and I can send a copy to you. You can find similar calculators online as well.

 

Good luck!

 

Added:

I do not use a PO Box. My street address does not appear on my business cards or my website. Of course, it does appear on my invoices.

You may also want to consider E&O insurance.

Edited by ljbrun
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I've actually wondered why I don't simply form 'Deathpig LLC'. Then, I can have Deathpig LLC contract my services to my current employer at a rate less than my current encumbered cost. Deathpig LLC can handle my travel, lodging, and health care (and maybe some per diem for lunches) as a cost of business (and, as a business, it can write off more of these expenses than I can as an individual).

 

I can make more money gross than I can write now, and pay less in taxes than I do right now, and cost my current employer less than he's already allocated for me than I am right now. Everyone wins!

 

What are you, Cosmo Kramer?

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Just FYI in general ...

 

ETA, the liability shield is overrated. Protection from what? If you are a one man operation, you are individually responsible for all torts because you have personal involvement. You have no protection from debts, because no one will lend you money without a personal guarantee.

 

As you get bigger and have employees, liability protection becomes more of an issue. When you are a one man show, the franchise tax issues and expense and ease issues are much more important in the business formation. This is why accountants and transactional lawyers are key. Really, if you just form a LLC at legal zoom its like 95% that you will eventually muck up the formalities so bad the corporate veil will dissolve at the first puff.

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Just FYI in general ...

 

ETA, the liability shield is overrated. Protection from what? If you are a one man operation, you are individually responsible for all torts because you have personal involvement. You have no protection from debts, because no one will lend you money without a personal guarantee.

 

As you get bigger and have employees, liability protection becomes more of an issue. When you are a one man show, the franchise tax issues and expense and ease issues are much more important in the business formation. This is why accountants and transactional lawyers are key. Really, if you just form a LLC at legal zoom its like 95% that you will eventually muck up the formalities so bad the corporate veil will dissolve at the first puff.

This

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Just FYI in general ...

 

ETA, the liability shield is overrated. Protection from what? If you are a one man operation, you are individually responsible for all torts because you have personal involvement. You have no protection from debts, because no one will lend you money without a personal guarantee.

 

Mucho importante..

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