Forming an LLC
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@eddiejennings said in Forming an LLC:
True. I mean atypical in the sense that the extra time it takes me to do this, isn't of great consequence to me (from @Mike-Davis 's comment).
I get where you're at. For me I was doing side work when my day job slowed down to 32 hours a week. Looking back at first I tried to do my own web site. I don't have a creative bone in my body and at a certain point, I realized every hour I spent on the site was just making it suck slightly less. I would have been much better off putting my time in to other things.
On the legal side, you set up the LLC to protect yourself legally. If you ever did have an issue, would you call up a lawer at zoomlegal to defend you? Would you call up a local lawyer that would look at your cookie cutter LLC and say this is worthless because of this technicality? I wasn't comfortable with the first option so I went with a local lawyer.
I will say this for zoom legal: Doing a dry run seeing what questions they ask you helps you minimize the time you spend with a local lawyer, which in turn saves money - so there is some benefit to starting down that path.
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@mike-davis said in Forming an LLC:
@eddiejennings said in Forming an LLC:
True. I mean atypical in the sense that the extra time it takes me to do this, isn't of great consequence to me (from @Mike-Davis 's comment).
I get where you're at. For me I was doing side work when my day job slowed down to 32 hours a week. Looking back at first I tried to do my own web site. I don't have a creative bone in my body and at a certain point, I realized every hour I spent on the site was just making it suck slightly less. I would have been much better off putting my time in to other things.
On the legal side, you set up the LLC to protect yourself legally. If you ever did have an issue, would you call up a lawer at zoomlegal to defend you? Would you call up a local lawyer that would look at your cookie cutter LLC and say this is worthless because of this technicality? I wasn't comfortable with the first option so I went with a local lawyer.
I will say this for zoom legal: Doing a dry run seeing what questions they ask you helps you minimize the time you spend with a local lawyer, which in turn saves money - so there is some benefit to starting down that path.
I see your point. From what I've gathered having a poorly worded (or non-existent) operating agreement is the source of most woes, rather than the Articles of Organization itself. I'd certainly seek the help of the former, and would probably be able to pay for some of the time, with the money saved by filing the latter myself.
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@mike-davis said in Forming an LLC:
On the legal side, you set up the LLC to protect yourself legally. If you ever did have an issue, would you call up a lawer at zoomlegal to defend you? Would you call up a local lawyer that would look at your cookie cutter LLC and say this is worthless because of this technicality? I wasn't comfortable with the first option so I went with a local lawyer.
I'd say the opposite. Cookie cutter and battle tested is exactly what you want. Your local lawyer has maybe done this three times and never defended it in court and has no resources for dealing with this. This is LegalZoom's bread and butter. Their cookie cutter solution has been tested over and over again, reviewed and reviewed and they have big resources to make sure it works because unlike your local guy that has no reputation to lose, LegalZoom has hundreds of millions of dollars on the line if their contracts aren't the best.
Not that a local lawyer won't be competent, but unless you are a legal consultant, it's a huge cost and risk that there is no need to take. What value would they offer to offset their risks?
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I would also suggest reaching out to meet with someone from your local score.org chapter. There are other things besides having an LLC that it's helpful to have a coach for.
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As a small single member LLC, when the LLC owner is performing all the work, the articles of organization is of limited effectiveness in minimizing exposure to personal liability. For example, many people acquire rental property in an LLC. (which is reasonable) Nonetheless, if the landlord him/herself personally fixes something in the rental property, and later, that thing breaks and hurts the tenant, the landlord is pulled into the dispute personally, along with the LLC. An insurance policy would be the greatest defense against liability in this case. Also, as a small single member LLC, any loan applied for, the bank most likely will require a personal guarantee by you as well, keeping you on the hook personally for the loan. However, the articles of organization becomes much more important when the LLC has multiple members.
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@spiral said in Forming an LLC:
As a small single member LLC, when the LLC owner is performing all the work, the articles of organization is of limited effectiveness in minimizing exposure to personal liability. For example, many people acquire rental property in an LLC. (which is reasonable) Nonetheless, if the landlord him/herself personally fixes something in the rental property, and later, that thing breaks and hurts the tenant, the landlord is pulled into the dispute personally, along with the LLC. An insurance policy would be the greatest defense against liability in this case. Also, as a small single member LLC, any loan applied for, the bank most likely will require a personal guarantee by you as well, keeping you on the hook personally for the loan. However, the articles of organization becomes much more important when the LLC has multiple members.
Even with multiple members, all of those things continue to apply. Loans are still guaranteed by individuals until the company is large enough to have its own credit rating.
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That is correct, however, the LLC has "charging orders" in regard's to creditors in relation to other member's personal issues.
Also, with multiple member LLC's, it is important to define what other members can do. Whether the LLC is member managed or manager managed. Define, how to add a new member, or remove a member out. Define the scope of operations. All this is to minimize exposure.
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From what I've read, the benefit of having an operating agreement for a single-member LLC is that it strengthens the documentation that you and your LLC are two distinct entities; thus, making the task of piercing the veil more difficult.
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That is correct.
"If it walks like a duck, quacks like a duck, it is a duck."
If you form an LLC, you want to treat it accordingly on all accounts, to benefit from the entity creation. There are many benefits, such as taxation, to treating a general business like a business and not like another personal checkbook.
However, the LLC is not a silver bullet, for general liability protection. The issue with a single member LLC is, it is difficult sometimes to separate the owner from personal liability, when the owner is personally performing services.
When you start adding additional members to the LLC, the importance of the “agreement” becomes exponentially more important for many reasons.
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Application for the LLC has been submitted. I ended not up not creating a separate document for the Articles of Orgnization, as the Georgia Secretary of State Corporations Division has an online form for creating a new business. Only tricky part was making sure you do your signature as a member (owner) rather than just an organizer.
Now I wait.
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Next order of business is to decide your income tax strategy.
As a sole proprietor LLC you generally have 3 taxation choices:
(These are tax elections only)
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Disregarded entity - this is the default for a single member LLC. It is the most simple, and is filed with your personal taxes on a Sch C.
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C-Corporation - this election will tax the LLC just as if it was incorporated at the state level, and is taxed as a distinct separate entity apart from the owner. The C-corp files its own income tax return, and pays its own tax. Can have tax benefits depending on the circumstance and corporate tax rates, however, adds layer of complexity, and introduces possible double taxation on dividends.
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S-Corporation - this election is a simultaneous election to be taxed as if it was incorporated, and elect the S status, which allows for pass-through tax treatment. S-Corporation files its own information tax return, but the income tax effect is passed onto the owners, and tax is paid at the individual level.
Consult with a tax advisor, because, depending on your situation and circumstances, there may be great advantages with going with one election over the other.
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@spiral said in Forming an LLC:
Next order of business is to decide your income tax strategy.
As a sole proprietor LLC you generally have 3 taxation choices:
(These are tax elections only)
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Disregarded entity - this is the default for a single member LLC. It is the most simple, and is filed with your personal taxes on a Sch C.
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C-Corporation - this election will tax the LLC just as if it was incorporated at the state level, and is taxed as a distinct separate entity apart from the owner. The C-corp files its own income tax return, and pays its own tax. Can have tax benefits depending on the circumstance and corporate tax rates, however, adds layer of complexity, and introduces possible double taxation on dividends.
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S-Corporation - this election is a simultaneous election to be taxed as if it was incorporated, and elect the S status, which allows for pass-through tax treatment. S-Corporation files its own information tax return, but the income tax effect is passed onto the owners, and tax is paid at the individual level.
Consult with a tax advisor, because, depending on your situation and circumstances, there may be great advantages with going with one election over the other.
I had this conversation with my CPA already. For right now, "Disregarded entity" is the best fit for me.
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Eddie Jennings Services, LLC now exists.
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@eddiejennings Congrats!
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@eddiejennings said in Forming an LLC:
Eddie Jennings Services, LLC now exists.
No apostrophe?
"Eddie Jennings' Services, LLC"?
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@tim_g said in Forming an LLC:
@eddiejennings said in Forming an LLC:
Eddie Jennings Services, LLC now exists.
No apostrophe?
"Eddie Jennings' Services, LLC"?
Nope, and if I did, if I did, it would've been "Eddie Jennings's Services, LLC" = meh.
