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hello and welcome today we are going to be talking about whether as a business you are an owner or employee it's possible to be both we're going to talk about those instances and help you kind of decide where you want to be make decisions accordingly so if you're new here my name is taylor darcy from think legal where i help you create the business of your dreams welcome i'm excited that you're here and please don't forget to subscribe and or like the channel so that you get updated when i go live please stop in and drop comments or uh contribute to the live chat more the merrier so please if you have fellow entrepreneurs that are out there make sure that they're stopping in and saying i'd love to to meet you and chat with you and and just help you with your legal business so let's go ahead and get started if you start your business as a sole proprietor then you're not an employee at that point you are an owner you're strictly an owner there is no option otherwise you you enjoy what's called pass through taxation so or pass through profits and therefore everything that you earn less your expenses is considered a profit and that's what you're taxed on and you're in charge of both sides of the tax when you're self-employed which is the front tax and the back tax which is if you're an employer you pay both and only half on the other but as a sole proprietor you pay both in that instance you're not considered an employee so it really depends on how you have your business entity set up will determine on whether or not there is a whether or not you're an employee an owner or both next thing is if you are an llc with no s corporate status which you can have that on an llc also no it's the same as a sole proprietor you're you are considered an owner you are not considered an employee so your taxes will be the same as though you were a sole proprietor or partnership those that's the that's how an llc and llc is considered a disregarded entity for purposes of taxes for a for a sole proprietor and it is taxed as a partnership as uh for a multi-member llc to kind of give you context where it gets tricky is if you are an llc and you are an s if you designate what's called an s corporate tax status you can do both or you can do that instead of the standard llc and then you become both an owner and an employee and if you are both the owner and an employee then you are taxed on your income and the business is is taxed on its profit so there's no double taxation and you you get payroll taxes deducted you're considered an employee of the company you are not considered a you are considered an owner as well but the just the tax situation is different the big difference is your salary then becomes deductible as an s corporate designation whereas in a non-s corporate designation your your income is not considered deductible if you are a corporation s status it's the same as an llc you get to enjoy the benefits of pass through taxation and remember this is a tax designation you don't actually have a physical s corp there are statutory closed corporations and we're not going to talk about those because that just kind of muddies the water a little bit especially in california but so your if your corporation with s status same thing you are taxed same as the llc with an s status and so you're going to give your you're going to take a salary you're going to be paid you're going to pay taxes and then the it's your your income is deductible or your pay is deductible for the business and then the business is taxed on its profits after that and then the next one is the corporation which is a standard corporation or a c corp is the other way of looking at it with no s status you're really just an owner um you're not considered an employee of the group and the problem with the c corp is you are there's what's called double taxation you're taxed on the earnings as well as the as a shareholder and the corporation is taxed as well there's depending on how big you are because of an s corporate tax status has a maximum of 100 shareholders and they all have to be um they can't be foreign entities then it really depends on your situation whether or not it works for you to have bse corp or not most of the time a standard corporation with an s corporate tax status is what you want most of the time for in the corporate world in the llc world you really want from from most businesses an llc is your best bet for most businesses not all it really depends on your goals so you want to keep that in mind that this is is dependent upon where you see your business taking if you aren't ever going to go public if you're never looking for investors if you're just building your own you know business and and you want it to be as protected as possible a straight llc with an s corporate tax designation can benefit you greatly if you're looking at getting bigger then you may want to file you may want to do a c corp with s tax designation until you get big enough to want more than 100 investors and then you would lose the s corp tax designation at that point and also depending on where you want uh some investors will require you to file in delaware so keep that type of thing in mind is that and really again this i cannot stress this enough seeing an attorney in your local area and discussing those issues with them is the best answer that i can give you because there are a lot of factors that you want to consider while you're making this decision because you could make a decision that based on the internet it sounds like a great idea but in the end it could end up hurting you greatly so keep that in mind really see a tax professional make sure that you're getting exactly what you're looking for based on your goals and based on what you want to do if you've gotten value out of this video please don't forget to subscribe and like don't forget to hit the bell icon so you're notified whenever i go live if you have any questions comments concerns leave them in the chat and i look forward to talking to you later have a great day you
Thanks for your comment Antony Willenbrock, have a nice day.
- Fabian Kortz, Staff Member
hi everyone welcome back if you're new here my name is lena i'm a certified public accountant this video is part of my series of videos that will help you start your business and will help you understand what business structure is the right choice for you in today's video i want to continue the subject of a limited liability company specifically let's chat about llc officer titles by the way if you're considering starting an llc and you need some guidance i have multiple videos here on my channel that will help you get started i will link some of them in the description below so we see so many different names lucy member llc shareholder registered agent what do they all mean sometimes you come across titles being used interchangeably which adds more to the confusion so in this video we'll go over various llc roles that you need to be aware of if you are thinking to start your llc by the way in my previous videos uploaded recently we discussed loc tax benefits how you should be paying yourself as an llc owner be sure you watch those videos next if you need some help with those specific questions and let's get started there are several title designations that are specific to llcs understanding what they are and how they function in your organization is essential to successful filing if you recently set up or are considering starting an llc it is a good idea to learn the different titles given to individuals within your llc some of the titles you might choose are corporate titles designating the roles of various corporate officers in the llc for example treasurer or vice president these corporate titles can be helpful in establishing who does what in your company but they aren't required under state laws other titles are covered by your state's laws and are particularly important when it comes time for your llc to enter into contracts with other individuals or other businesses so this knowledge that i will share with you is extremely important if you do want your llc to be a successful business so first things first what is an llc member a member of a limited liability company refers to an llc owner that is anyone who has an ownership interest in the llc generally speaking unless the llc is a manager managed llc which we will discuss in a moment or unless otherwise stated in the llc operating agreement all members of an llc play an active role in the management of the company and have the authority to bind the company contractually your llc operating agreement should set out the specific powers and responsibilities of its members now let's talk about corporate officers or employees while an officer of the company or an employee may also be a member not all officers or employees are members or owners in order to be a member the officer or employee must hold an ownership interest in the llc now what is an llc manager while most llcs are member managed in some cases you will find that a manager managed llc may be the more appropriate choice in the manager managed llc the management of the company i know it is redundant the management of the company is delegated to either a third party manager or to a member or group of members who are known as managing members so when an llc is a manager managed llc members who have not been designated as managing members do not participate in the day-to-day management of the company nor do they have the authority to enter into contracts to bind the company contractually that is a very important key point that you will need to keep in mind these powers and responsibilities belong instead to the llc managers or managing members the rights and obligations of llc managers or managing members should be documented in the llc operating agreement and if you do have a group of individuals who are considered to be managing owners of your company you do want to have the operating agreement in place and you do want to have it written in a very black and white language that way there is no room for interpretation and no room for a misunderstanding or some type of an error that may cause problems down the road there are several other titles that you will run into as an llc owner these titles may not be used in your specific llc but it is a good idea to know what they are and what distinguishes them so let's talk about shareholders llcs have llc members rather than llc shareholders a shareholder is someone who holds stock or shares in a corporation at first glance a shareholder might seem very similar to an llc member or owner however you choose to call that role but in reality the two are very different while a shareholder may have voting rights this will depend on the type of shares held unlike an llc member he or she won't have a right to participate in the management of the company or have the authority to bind the company contractually now let's talk about directors the title of a director applies within the context of a corporation so if your llc is structured as a corporation you may have to have a director or somebody who will play a role of a director and will hold the title corporations are run by a board of directors who are elected by the shareholders within an llc however either members in a member manage llc or managers or managing members if there's a group of people are responsible for the management of the company rather than the board of directors and that is an important distinguishing point between directors shareholders and members who are essentially owners of the company now let's talk about the third group that you will want to know about corporate officers as an llc your company may decide to appoint corporate officers such as president vice president or treasurer to handle certain jobs or certain tasks within the company these corporate titles can be useful in designating who does what within your llc but overall management and the authority to bind the company still rests with the llc members or managing members if there's a group of individuals depending on the structure of your llc now let's chat about a sole proprietor a sole proprietor is someone who owns and operates his or her own business an llc cannot be a sole proprietorship as they are two different business structures with that said however an individual can decide to register as an llc instead of running his or her business and the sole proprietor you can also elect to be taxed as a sole proprietor essentially where all of your profits will be reported on your forum 1040 schedule c um i talked about llc taxation in a separate video so if you want to find out more make sure that you watch the video next now let's chat about a registered agent an llc registered agent is a third party usually registered in the same state in which the llc is established who has been designated to receive official government notices mail documents on the llc's behalf most states will require llcs to have a registered agent but even if one isn't required by your state there are many benefits to having a registered agent which you should consider and by the way there are many legal questions as well that may come up that you wouldn't want to handle as an
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- Fabian Kortz
About the author
I've studied world englishes at Florida College in Temple Terrace and I am an expert in military sociology. I usually feel excited. My previous job was alcohol & drug abuse assistance coordinator I held this position for 13 years, I love talking about philately and mountain climbing. Huge fan of Daniel Day-Lewis I practice synchronized swimming and collect baseball cards.
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