Do i need to form an LLC to start a business [Pictures]

Last updated : Aug 27, 2022
Written by : Frances Muray
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Do i need to form an LLC to start a business

Should I establish myself as an LLC?

With an LLC, only the assets owned in the name of the LLC are subject to the claims of business creditors, including lawsuits against the business. The personal assets of the LLC members cannot be claimed to satisfy business debts. For most people, this is the most important reason to form an LLC.

Do you have to pay the $800 California LLC fee the first year?

Every LLC that is doing business or organized in California must pay an annual tax of $800. This yearly tax will be due, even if you are not conducting business, until you cancel your LLC. You have until the 15th day of the 4th month from the date you file with the SOS to pay your first-year annual tax.

How much is an LLC in Texas?

The basic total cost of forming an LLC in Texas is $300. The basic total cost of registering a foreign LLC in Texas is $750. The optional costs of a certified copy of the filing document, a certificate of status, and hiring an outside registered agent could raise this total by between $85 and $535.

How much does a LLC cost in California?

Starting an LLC in California – fees to file You'll pay two filing fees with your LLC application in California: $70 fee to file articles of organization with the California Secretary of State's office. $20 fee to file a Statement of Information, Form LLC-12, with the California Secretary of State.

What are 3 disadvantages of an LLC?

  • Cost: An LLC usually costs more to form and maintain than a sole proprietorship or general partnership. States charge an initial formation fee.
  • Transferable ownership. Ownership in an LLC is often harder to transfer than with a corporation.

How much does an LLC cost?

You can file the LLC filing documents online, by mail, or in-person when visiting the local SOS office. The filing costs usually vary from $50 to $150 which is a single-time fee. If you plan to form your company in another state, then you might have to provide additional documentation and pay a higher formation fee.

How much can an LLC write off?

If you have $50,000 or less in startup costs and are in your first year of business, the IRS allows you to deduct $5,000 in startup costs and $5,000 in organization costs from your taxes. If your startup expenses exceed $50,000, the total deduction will be reduced by however much your expenses exceed $50,000.

How do I avoid LLC tax in California?

Can I avoid the California Franchise Tax? There's no way for a registered business to legitimately avoid the California Franchise Tax. Sole proprietors and general partnerships don't have to pay the California Franchise Tax, but they also don't have any personal liability protection.

How do I file an LLC with no income in California?

LLC Partnerships If an LLC elects to be treated as a partnership for tax purposes, and the business did not generate any income during the taxable year, it is generally not necessary to file a tax return, unless there are business expenses to be treated as credits or deductions.

Do you have to pay for LLC every year in Texas?

Texas LLC Certificate of Formation ($300) The fee for a mail filing is $300 and the fee for an online filing is $308. The filing fee is a one-time fee. You don't have to pay any monthly (or annual) fees to maintain your Texas LLC.

What is required to get an LLC in Texas?

  1. Name your Texas LLC.
  2. Choose your registered agent.
  3. Prepare and file Certificate of Formation.
  4. Receive a certificate from the state.
  5. Create an operating agreement.
  6. Get an Employer Identification Number.
  7. File an LLC Franchise Tax and Public Information Report.

How long does an LLC last in Texas?

During formation, the owner(s) of the LLC can designate its lifetime in the Article of Incorporation. After said date, if the company is planning to continue its business activity due to any reason, a new date has to be set and notified with the Texas government.

Why should I use an LLC?

The main advantage to an LLC is in the name: limited liability protection. Owners' personal assets can be protected from business debts and lawsuits against the business when an owner uses an LLC to do business. An LLC can have one owner (known as a “member”) or many members.

How long does an LLC take in California?

How long does it take to form an LLC in California? The state will approve your California LLC in 3-5 business days. Also, if you form your LLC during peak filing season (December through January), approval can take up to 6-7 business days. You can form your California LLC online or by mail.

How do I file for a LLC in California?

To form an LLC in California, go to, log in, select Register a Business under the Business Entities Tile, Articles of Organization - CA LLC and follow the prompts to complete and submit.

What can you write off with an LLC?

  • Car expenses and mileage.
  • Office expenses, including rent, utilities, etc.
  • Office supplies, including computers, software, etc.
  • Health insurance premiums.
  • Business phone bills.
  • Continuing education courses.
  • Parking for business-related trips.

What does LLC mean for dummies?

A limited liability company (LLC) is a business structure in the U.S. that protects its owners from personal responsibility for its debts or liabilities. Limited liability companies are hybrid entities that combine the characteristics of a corporation with those of a partnership or sole proprietorship.

Why is LLC may not beneficial?

Profits subject to social security and medicare taxes. In some circumstances, owners of an LLC may end up paying more taxes than owners of a corporation. Salaries and profits of an LLC are subject to self-employment taxes, currently equal to a combined 15.3%.

Is it better to be a sole proprietor or LLC?

One of the key benefits of an LLC versus the sole proprietorship is that a member's liability is limited to the amount of their investment in the LLC. Therefore, a member is not personally liable for the debts of the LLC. A sole proprietor would be liable for the debts incurred by the business.

How do you start an LLC?

  1. Step 1: Choose a name for your LLC.
  2. Step 2: Reserve a name (optional)
  3. Step 3: Choose a Registered Agent.
  4. Step 4: Prepare an LLC operating agreement.
  5. Step 5: File organizational paperwork with the state.
  6. Step 6: Obtain a certificate from the state.

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Do i need to form an LLC to start a business

Comment by Samual Vegas

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Thanks for your comment Samual Vegas, have a nice day.
- Frances Muray, Staff Member

Comment by Jarred

do I need to form an LLC for my business do I even need an LLC to start a business in this video i'll be super simplifying how to choose what type of business to form and when to form it Amanda here from the business finance coach where I'm simplifying the tools of business so that you can succeed if any of this sounds like stuff you could use in your life you can join us here in this community by clicking the watermark in the bottom right corner of your video screen and subscribe while still watching this video back to do I even need an LLC when to form what type of business and why to four-bit what does it do for you and when why which one to choose all of it super simple in a few minutes so first things first do I need an LLC to start a business no you do not need to form any type of business you can just start a business you can sell something to someone and you can just do it you don't have to form a business at all you can just be you and you can sell something and when you do that you are a sole proprietor without forming anything you are automatically a sole proprietor unless you're working with someone else and you guys are partners then you have a partnership which can simply be based on a verbal agreement even though you didn't form any business now that being said what you don't have to actually form a business you will just be a sole proprietor or a partnership you still may have requirements to register with your state also if you've thrown up a name Amanda's accounting services for example you would need to register that name under what's called a DBA or a trademark with your state and you can just search your state website you don't need to use all these LegalZoom and different websites see you're just giving them the same information and some extra money to do the same thing you could do on your state website save yourself a few dollars that's what I do for you here head on over to your state website so we covered that you do not have to ever form a business a legitimate business you automatically do that by selling things and starting a business you're either a sole proprietor or a partnership that being said you can also form a business entity through a state government this is a legal entity just like you are a legal person under legal law you can create a separate entity from yourself this makes your business separate from you so what does it mean to go form an actual business entity with a state government your state government presumably where you're working that's where you want to form to answer this question when to form the business we first need to look at what types of businesses can be formed through state governments because it's going to depend on what type of business structure you choose as to when you should form it we are gonna come back around to the LLC as being the primary recommendation in this video but this will help you understand why and understand so much more about the business we have a few different options okay the LLC a formal partnership for which there are many types limited liability partnership general partnership corporation or a non-profit those are kind of the basic types of businesses that you can form so which one of these businesses would you choose this comes down to two things it comes down to primarily your business model how your business is structured for example if you're one person just providing a service as a contractor you would never want to form a corporation and you're not allowed to form a partnership because you're one person so your only other option is the single-member LLC and the LLC really is the go-to for any small business that's because a corporation is a very complex structure you have to use a Board of Direct and you have owners that buy stock in the company and are the owners who are separate from the managers so when would you use a corporation you use a corporation if you are going to get funding in the business and typically that's a general rule you're gonna get a lot of funding into the business and you're doing something where you need a lot of people involved in the business mind you this is also how many founders get fired from their own business ie Steve Jobs remember Apple so for most small business owners the corporation is out of the picture I see way too many small businesses going out there and forming a corporation because in the past that was the only option and so yeah you had to do it if you wanted to be a legitimate business you're making legitimate money these days the LLC the recent innovation of the LLC has declared the corporation irrelevant for us small business owners you don't need it and it really complicates things you have to be willing to spend seriously 10 grand to start a corporation so for most small businesses the LLC makes a lot of sense and generally if you have two or more members you would still do the LLC over the partnership for what I'm gonna talk about next but the LLC really is the replace all its much easier to maintain operate form and so it's really replaced the corporations and partnership structures especially for the small business owner okay so the big question when do you form an LLC for your small business from the technical standpoint if you have a lot of assets house retirement plans those sorts of things the whole entire purpose of legal business entities was to protect your assets and allow the business to take out loans that you aren't responsible for now that's no longer the case for small businesses because no one gives you a loan without you personally backing it anyways so that's pretty much irrelevant to the conversation however you still have assets that you want to protect you also might be interested in protecting your future earnings because if you mess up if you are sued and they look at the money you have and say oh you don't have any they say well you're gonna earn some in the future and so we can attach to your future earnings so that brings me to the second consideration of when to form an LLC if you're in a high soo industry which I mean if you're doing things right you really it really shouldn't matter you shouldn't be sued either way but there are certainly some industries that are higher sued and this is kind of the legal recommendation if you have assets and things you want to protect or if you're in a high soo industry maybe medical related or construction actually I think is pretty high then you would want to consider forming the LLC right out the gate to protect you what happens the LLC you sued as long as you've maintained it properly which I will talk about next then you would just close the business if they attach to the LLC's future earnings it's a very semantic system but you got to check your boxes and dot the t's and eyes so in reality though I find most people form an LLC because they want an LLC on the name of their business and they want to be like look I'm legitimate and it is true that it does give you a little bit of you know you've done the steps you're here to stay you're around but I don't really recommend forming an LLC before getting some clients becaus

Thanks Jarred your participation is very much appreciated
- Frances Muray

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