Introduction:
Congratulations on taking the first step to starting your US business!
One of the hardest parts is trusting yourself to take the leap of faith and start your own business. But trust me, if you work hard and stay focused it will all pay off. You have already shown that you are dedicated and ready to get started by simply reading this cheat sheet!
As a business lawyer, I have had the opportunity to help hundreds of entrepreneurs launch their businesses and obtain their dream of having financial freedom. There is nothing more rewarding for me than to be able to speak with individuals who have a passion and help them turn their dreams into a reality.
Over the years, I have seen many entrepreneurs make mistakes and my goal is to prevent you from making the same mistakes.
So, I have decided to share with you my knowledge of these mistakes.
After you have finished reading this you will learn about the three tasks you must complete before registering your LLC and 3 things you must do after registering the LLC. These 6 recommendations will certainly save you time, money, and frustrations down the road.
To your success,
Robert Goldberg, Esq.
Fast Biz Law
Fastbizlaw.com
Prerequisite #1: Speak to a tax professional
So the first thing you should do before forming an LLC is to research the tax implications of registering an LLC. It is important to speak with a tax professional before you decide to register an LLC so he or she can determine if this is economical from a tax perspective. The accountant will also be able to help you determine if you should do an LLC or corporation and how to have the LLC taxed. Many people form LLCs because they think that they will help them save money on taxes, but this is not always the case. For example, if you live in California and register an LLC in California, then you are going to be required to pay a minimum $800 per year franchise tax board fee. Overall, an LLC is not a tax savings strategy and LLCs and sole proprietors are taxed at the same rate, meaning that you will pay the same amount in taxes without an LLC. Keep in mind this is not accounting advice and I am not an accountant, but oftentimes an LLC does not guarantee to save you money on taxes. However, in many situations, an LLC can save you money on taxes such as if you elect to have the LLC taxed as an S-corporation, then you can save about 15% on self-employment taxes, but keep in mind this is only something that should be done if you are making a certain amount of money.
Prerequisite #2: Speak to a lawyer
So, moving on, the next thing I recommend that you do before you register an LLC is to speak with a legal professional to determine which business entity is best for your particular situation. There are many factors that must be taken into account before you decide to register your business. Sometimes an LLC will unnecessarily complicate things and we will recommend that you just start out small and be a sole proprietor with an EIN and DBA. Other times we will recommend a corporation over an LLC especially if you plan to go public, raise money from outside investors, or plan on becoming very large in the near future.
Whereas with an LLC we would recommend this if you don’t plan on going public but just want the liability protections so that you can rest easy knowing that you have a layer of protection and division between you and your business. If an LLC or corporation is recommended then a legal professional will also help you determine which state to file the business entity. Oftentimes people hear that forming in Delaware or Nevada is the best thing to do. However, a legal professional will not usually recommend that you do this because you will still have to register in your own state as a foreign entity. Often times it is recommended that you just register in the state that you are in and not register in one of the popular states like Delaware because it will result in you having to pay fees in two states and having to deal with more paperwork and maintenance.
Prerequisite #3: Business Plan
The last thing I recommend that you do before you register a business is to put together a business plan of some sort that sets forth the capital you plan to invest, your marketing strategies, and company structure. When you register an LLC it is important to have your ducks in a row and know who is going to be the owner or owners of the business and who will be the manager. You should speak with your partners and put down the organizational structure on paper so that when you do speak to the professionals you can utilize your time more efficiently. The number of partners and capital you plan to invest will significantly impact the lawyer and accountant’s recommendations. For example, if it is just you, then you will likely be told to be taxed as a sole proprietor, however, if there are multiple partners, then you will be taxed as a partnership or s-corporation.
After Formation
Post Formation Step 1:
The first thing is to file the statement of information. When you register an LLC in your home state it is very likely that you will then have to file something called a statement of information within 30-90 days after filing the articles.
The statement of information is a relatively simple process in most states and will require that you pay the state an additional fee (and in some states, there is no fee).
Often times you can log on to the state’s website and do the statement of information online. The statement of information is something that is required by the state each year or two depending on the state. It is essentially a short questionnaire asking you if there have been any changes to the LLC since you filed the articles or since you filed the last statement of information.
The questions are relatively simple and will consist of questions such as, what is the name of your LLC, is the address still the same? Are the managers still the same? and Is so and so still the registered agent. Overall the process is pretty painless but it is important to remember to file this each year or two depending on your state’s requirements. Failing to do this may result in you incurring high late charge fees and it may also result in your LLC being temporarily shut down or inactive. This is very risky because if your LLC is not up to date and active, then the business activities that you engage in will be at risk of exposing you to personal liability. If you are operating without an active LLC, then you may lose the personal liability protection that an LLC provides to you.
Post Formation Step 2:
The second thing that you must do after registering your LLC is to obtain an EIN tax number. The EIN number is essentially a tax number for your business. The EIN number is necessary if you want to properly run your business and open up various accounts such as an amazon seller account, a bank account, and a PayPal account.
You can obtain the EIN number by going to the IRS website. You will be asked for the name of your business entity and how you would like the entity to be taxed. It is important to make the proper selection when obtaining your EIN number because it is not easy to change this after you begin operating a business for a while. So be sure to speak to an attorney and an accountant before you get your EIN number to ensure that you are being taxed properly.
Post Formation Step 3:
The third important thing to do after your register your LLC is to open up a bank account in the LLCs name. When you have an LLC or a corporation it is very important to keep all your business affairs separate from your personal affairs. This means that all expenses related to the business must come out of a separate bank account that is funded. It also means that all money you make from the business is deposited into that bank account as well. Not doing this will put you at risk of losing the personal liability protections that an LLC provides to you. If you don’t separate your business affairs from your personal affairs, then a court might say that you have been commingling your assets and they may take away the personal liability protection that an LLC provides. In legal terms, this is called piercing the corporate veil and is something you must avoid. After all, it is very easy to go to the bank and open up a bank account in the business’s name and get a business debit card and perhaps a credit card as well so that you can start building up your business credit.
So overall, three very important things you must do after registering your LLC are to file the statement of information, obtain your EIN number, and open up a separate business bank account.
About Robert Goldberg, Esq.
I am a business lawyer that helps entrepreneurs launch and grow their businesses in the US. My goal is to make your life easier so that you can focus on what you’re good at.
My Story:
After graduating from law school I knew that I wanted to help people with their businesses. I decided to follow my entrepreneurial dreams and start my own law firm to help business owners and entrepreneurs like myself.
Since then, I have helped hundreds of business owners with their legal needs so that they can focus on what they are good at… GROWING THEIR BUSINESS!
I am dedicated to sharing with you my knowledge so that you don’t have to make the same mistakes that my previous entrepreneur clients have made. My goal is to ensure that things are done correctly for your business the first time around so that you don’t deal with roadblocks or headaches down the road.
Don’t waste days, weeks, or months trying to figure out how to handle these complicated legal forms yourself. Your time is valuable and can be used more efficiently in other places. I believe strongly that being able to delegate work to others is the key to building a profitable and efficient business.
Work smart, not hard.
Let me handle all of the complicated requirements for you such as:
- Obtaining the proper tax ID numbers.
- Filing your articles with the Secretary of State’s office.
- Preparing your operating agreement
- Setting up your registered agent
- Ensuring that you are choosing the right business entity
- And much much more…
I have learned a lot over the years and seen entrepreneurs make mistakes time and time again.
Let me help you by sharing my knowledge with you so that you can avoid these roadblocks!
If you’re ready to grow your business without having to deal with the complicated forms and have an experienced lawyer ensure that the process is done the RIGHT WAY, then book a call with me!
Book your FREE call with my using the link below:
https://calendly.com/fastbizlaw
Please keep in mind that I only work with entrepreneurs who are committed to starting their businesses and taking action!
If that is you, then please book a call with me!
Click here to book your meeting!
All the best,
Robert Goldberg, Esq.
Fastbizlaw.com
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