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Written by : Ignacio Forester |
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hi guys welcome to the simplify llc channel in this video we will talk about choosing between a partnership or an llc if you are new here don't forget to subscribe and press the bell icon to be notified when a new video appears let's dive right in you're starting a business a huge endeavor and you need a little operational knowledge when deciding the best business structure for your business that you're starting with someone else you may wonder if you should form a partnership a limited liability company a limited partnership or a limited liability partnership well we have all the details to make the right decision for your business but first off what is a partnership a partnership is a formal agreement made by two or more business partners to go into business together a general partnership is an operations structure that is unincorporated there's no need to submit any paperwork to the governmental authorities but it's good to have a written agreement in this agreement you'll simply outline everyone's responsibilities you can also choose a joint business venture recognized and regulated by governmental authorities multi-member llc an llc with more than one owner is a multi-member llc or an llc partnership with an llc you get personal liability protection for all members in an llp or limited liability partnership each owner does have personal liability for what they do still they may be protected from liability for any wrongdoings of the other owners or the llp an lp or limited partnership will have at least two owners or partners but one of these owners has a limited personal liability so they are only liable for debts up to how much they have invested in the business there also needs to be a general partner who has management control over the operations but has no liability protection for debts accrued by the company a gp or general partnership is the most straightforward business relationship for two business owners to form you just have to have two or more people starting a business and you don't have to file anything with the state there is no liability protection for any of the company's owners each one has personal liability for the debts of the business and the things that the other owners do you may be wondering what the difference between a gp and an lp is now remember that a gp doesn't offer liability protection for anyone in the business an lp is incorporated and you have to have one general partner and you can have limited partners those limited partners aren't involved in the daily activities of the business they just provide capital or advise the company so they have limited personal liability for the amount they invested in the business all right now what's the difference between an lp and an llp an llp or limited liability partnership makes each owner only liable for the actions they take a formal operating agreement is required listing all members duties and liabilities llps are considered pass-through entities so each partner reports their share of their profits and pays taxes on it lps don't pay self-employment taxes also llps are usually limited to professional firms like law firms accounting firms or medical practices you can use the lp structure for any business so the big one partnership or llc an llc is a fusion structure it's like a partnership but an llc has to do state filings also the operational requirements differ each year you have to file annual or bi-annual reports taxation may be the same but as an llc you can decide to be treated as an s-corp or c corp more about llc s corp and c corp you can find in our separate playlist about this the link is in the description below with an llc you have to file articles of incorporation with the secretary of state including your operating agreement and other documents your filing fees range from just under fifty dollars to five hundred dollars gps don't have to file with the state however are the operational requirements different for partnerships and llc's so liability when you have a gp you can be liable for all wrongdoings and debts of the business as a separate legal entity an llc offers asset protection for members llps and lps can provide liability protection for the actions of other partners the securities regulations so with an llc you can sell interest in the business lps can do the same how are partnerships and llcs taxed all partnerships and llcs have to file federal tax returns each year on form 1065. you have a pass-through tax structure if you have a partnership so all income losses and deductions are reported on your personal income tax returns each partner is taxed like a partnership with an llc unless you choose to be taxed as an s corp or c corp you should know that limited partners sometimes have to pay self-employment taxes if you get regular income from the business let's wrap this up gps are easy to form but they don't offer the liability protection that an llc would lps and llps can provide liability protection to some partners well that's it for today thanks very much for watching if you want to know more about what an llc is its benefits and disadvantages or about sole proprietorships you'll find the link to those videos in the description box below also don't forget to like and subscribe feel free to write in comments if you have any further questions we will see you next time
Thanks for your comment Kory Marinelli, have a nice day.
- Ignacio Forester, Staff Member
how's it going everybody welcome back taxes made simple the channel where i demystify tax information to make taxes simple and stress-free welcome back in in today's video we're going to be going over the difference between single member versus multi-member llc's that's right there are several different types of llcs and i know you guys are aware of that and each have their own rules and tax obligations and if you are thinking about starting an llc you need to know whether or not it makes sense to have a single member or if you should be setting up a multi-member and getting into partnership with somebody maybe the government views single member llc's different than they view multi-member llc's single member llc's are actually disregarded entities are you sure you want a disregarded entity learn more come on in and i'd like to take a moment to thank taylor brands for sponsoring this video more on them later right guys before we jump into the differences between single member and multi-member llc's let's go over a quick refresher of what llcs are so we all have the same understanding llc stands for limited liability company a limited liability company is just a type of business structure that limits the liability for the business owners that's all it is okay what this means is is that the llc's if the business incurs large debts that are called in or is sued the owners of the business cannot be personally held liable for the debts of the business only the business can be held liable and only the businesses assets are at stake this is opposed to other business structures such as sole proprietors in which business owners can be held personally liable for lawsuits or the company's debts now before we continue this video i'd like to briefly talk about the many challenges new entrepreneurs face when starting a new business being an entrepreneur myself i remember running into a lot of challenges trying to figure out who is going to set up my llc who is going to create my website who is going to create my logo who is going to run my email marketing i had all of these different hats that i had to wear and the list goes on and on and on as many of you guys know time is money so why not work smarter than harder this is why i want to introduce you guys to taylor brands right now taylor brands is the one stop shop for all aspiring business owners because taylor brands offers everything from logo making they can offer your domain a website creation a business card printed for you merchandising and now they even provide llc services all on their website so it makes it truly a one-stop shop making it super easy for any new business owner who's getting launched an easy way for them to get launched for an affordable price right now taylor brands is only charging about 3.99 so spending money with them and doing research is how you can get your business off the ground and brand yourself correctly if you're interested in learning more visit the link below let's get back to this video okay now that we've done a little quick refresher on llc's let's talk about single member llcs and multi-member llc's a single member llc first is an llc in which one person has complete control over full ownership of that llc however the llc is still considered its own legal entity separate from the owner owners of these type of businesses they do not have to worry about their personal bank accounts their personal houses cars retirement accounts savings accounts etc being seized to pay for a debt or reliability of the business this provides single member llc owners with a level of insulation from the risks associated with their businesses so this liability limitation is essential for helping single member llc owners to feel confident enough to conduct business and to take certain risks that are necessary for the expansion of business or else we would probably not see as many business owners we have today for example without liability limitations a business owner might not feel comfortable enough to take a 50 000 loan to grow his business because he might be worried that he will have to end up paying this back if something were to go south or he might have to give up at his house in order to cover the debt if everything goes south with the business but with limited liability protection of a single more llc he might feel secure enough to take the risk which might be vital to taking his business to the next level and having this protection is especially important for single member llc owners because they run their businesses by themselves without any other partners this is because they would have to shoulder the full burdens and debts and liabilities of the businesses themselves if something were to go wrong with the company in such a case they wouldn't have any partners to help them for tax purposes guys single member llcs are considered pass-through entities this means that the taxes pass through the llc directly to the owner meaning the owner is the only one taxed once for his or her income through the llc and the llc is not taxed separately okay senior member llc owners are required to pay self-employment taxes on their taxable income welcome to my channel and multi-member llc owners are too now let's talk a little bit more though about the multi-member llc because multi-member llc's are completely different than single member llcs it clearly means you have multiple members multi-member llc's can have unlimited amount of owners so two people could form a multi-member llc together 10 people can form a multi-member llc together a thousand people could form a multi-member llc together and etc when it comes to forming either a single or multi-member llc in america most states are very open about who can form one for example all the following people that i'm about to list can form either a single member or a multi-member llc in most states in america if you're one a sovereign citizen two a non-us citizen three a non-us resident or for you are another llc or a corporation multi-member llcs are either member managed or manager managed and what i mean by that is member managed llcs are multi-member llc's in which all of the members are responsible for running the business together and a majority approval is required to enter into contracts into securing loans or just making other legal binding decisions this is a member managed llc a manager managed llc are multiple member llc's in which one person or a number of people acts as managers for the business and are responsible for running it managers can be members of the llc or third parties just like single member llc's just like single member llcs multi-member llcs limit liability for the llc owners and protect them from being held personally liable if there is a lawsuit or if there is a major debt that is owed by the company that is called in now it is important to note that both multi-member llc owners and single member llc owners can be held personally responsible if they commit a criminal act such as fraud or embezzlement so just because you have limited liability if you own an llc does not make you exempt from following the l
Thanks HugfeerryO your participation is very much appreciated
- Ignacio Forester
About the author
I've studied astrophysics at Fisher College in Boston and I am an expert in environmental law. I usually feel indifferent. My previous job was elementary school administrator I held this position for 23 years, I love talking about horsemanship and ceramics. Huge fan of Lizzy Caplan I practice fishing and collect disneyana.
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