do you need an llc for small business [Pictures]

Last updated : Aug 16, 2022

Written by : Aldo Eckroad

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What is minimum for LLC?

One of the most popular business structures, is known as a Limited Liability Company or LLC. An LLC is a legal entity that gives business owners added benefits compared to a sole proprietorship or general partnership and helps protect owners personal assets.

What are the 4 main types of businesses?

The most common forms of business are the sole proprietorship, partnership, corporation, and S corporation.

What is the downside to an LLC?

Disadvantages of creating an LLC States charge an initial formation fee. Many states also impose ongoing fees, such as annual report and/or franchise tax fees. Check with your Secretary of State's office. Transferable ownership. Ownership in an LLC is often harder to transfer than with a corporation.

Is owning an LLC worth it?

Forming an LLC offers major benefits for most small to medium business owners. Registering and operating as an LLC will provide business owners legal protection for personal assets, credibility and a long list of other advantages usually only found spread throughout a number of other business structures.

What qualifies as small business?

Meet size standards The SBA assigns a size standard to each NAICS code. Most manufacturing companies with 500 employees or fewer, and most non-manufacturing businesses with average annual receipts under $7.5 million, will qualify as a small business.

What is the best legal structure for a small business?

you don't need to attract investors.
you plan to invest most of your profit back into the business each year.
you would benefit most from an easy to maintain business structure.

What business structure is best for a small business?

Sole proprietorships are the easiest business structure to form. And, they have the least amount of government regulation. Partnerships are also relatively easy to form. You can start a partnership with as little as a handshake.

What does an LLC not protect you from?

Thus, forming an LLC will not protect you against personal liability for your own negligence, malpractice, or other personal wrongdoing that you commit related to your business.

Does having an LLC affect debt?

Overview of Corporate Limited Liability If the corporation or LLC cannot pay its debts, creditors can normally only go after the assets owned by the company and not the personal assets of the owners. However, the business owner can also be held responsible for corporate or LLC debts in certain situations.

How is LLC taxed?

Working of LLC Taxes For the purposes of federal income tax, LLCs are treated as pass-through entities, which means that LLCs themselves do not pay taxes on their business income. It is rather its members who pay the taxes on their share of LLC's profits.

Why starting an LLC is a good idea?

Some of the benefits of an LLC include personal liability protection, tax flexibility, an easy startup process, less compliance paperwork, management flexibility, distribution flexibility, few ownership restrictions, charging orders, and the credibility they can give a business.

Why is LLC better for small business?

An LLC lets you take advantage of the benefits of both the corporation and partnership business structures. LLCs protect you from personal liability in most instances, your personal assets â€” like your vehicle, house, and savings accounts â€” won't be at risk in case your LLC faces bankruptcy or lawsuits.

How do you prove you are a small business?

IRS form K-1.
Business emails.
Business meeting minutes.
Business resolutions.
Other business records.

What are the 3 types of small business of small business?

Types of small businesses can include sole proprietorships, partnerships and incorporated companies.

What are the 5 types of small business?

Sole proprietorship.
Partnership.
Limited liability company.
Corporations.
Cooperative.

What is better than a LLC?

In general, corporations have a more standardized and rigid operating structure and more reporting and recordkeeping requirements than LLCs. LLC owners have greater flexibility in how they run their business.

What is the cheapest legal form to start a business?

Formation: The sole proprietorship is the simplest way of doing business. The costs to create a sole proprietorship are very low and very little formality is required. Pros of a Sole Proprietorship: Easy and fairly cheap to establish.

What are the 3 types of LLC?

Single-member LLC for the sole-proprietorship (solo entrepreneur)
Multi-member LLC (member-managed LLC or manager-member LLC)
Domestic LLC and Foreign LLC.
Series LLC.
L3C Company (low-profit LLC)
Anonymous LLC.
Restricted LLC.
PLLC and LLC.

What is the easiest business type to form?

Sole Proprietorship Simplicity of organization-this is the most common form of business organization in the United States because it is the easiest and least expensive to establish.

What is the hardest part of owning a small business?

Failure is part of the growth process. The toughest part of founding and running his own business, Bradley says, is dealing with the fear that he may so many times he'll want to give up. â€œFail fast, fail often, fail cheaply â€“ that's a startup motto and something high growth startup founders should follow.

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Comment by Tyron Przybyla

business hotel

Thanks for your comment Tyron Przybyla, have a nice day.
- Aldo Eckroad, Staff Member

Comment by Tim

that was so family it's your favorite uncle cousin Tyrone Gregory back at it again here with another video and this time I am going to be doing my very best to convince you of the fact that you do not need an LLC to start your business or any other kind of business structure for that matter this is something that I feel is truly important something that I think every aspiring entrepreneur anybody who's looking to start a business should know this is something that I wish somebody would have told me when I was very when I was just getting started out so let's go ahead and get to today's video why you don't need an LLC there are plenty reasons to form an LLC however those reasons are extremely specific and strategic you don't form an LLC just because the your your friend told you so or you heard an advertisement on a radio you went to a seminar even if you watch the video and somebody said that if you're starting a business you did LLC that is the incomplete incorrect wrong way and wrong reason for wanting to start an LLC trust me as somebody who has been preparing taxes for small businesses over a decade now I can honestly say with certainty that over 80 percent of the people who have LLC's don't need one and what's even worse is the reasoning behind why people want LLC's I've heard some ridiculous reasons why people want LLC's as a matter of fact the inspiration for this video happened because doing past tax season a gentleman came and sat down at my desk and argued with me for 15 to 20 minutes as to why he wanted an LLC and I did my best to convince him that he didn't as a matter of fact the conversation with a little something like this hey boss smells go out or not gonna help you what's up bro I need to form an LLC okay this is there a particular reason why you want to form an LLC yeah cuz I'm about to start driving for uber okay that's it you're just gonna drive for uber you're not gonna do anything else you're not about to buy a fleet do something up there maybe invest in something start other businesses I mean is that really the only reason you wanna start an LLC just because you're talking for a little bit yeah man is what they told me I can save a lot of money your father incorporated us started LLC well if that's the only reason you wanna start a LLC man let me honestly tell you know you don't yes I do no you don't man yes I do no you don't and that conversation lasted longer than they need it to for yeah and that's exactly how that conversation went so let's go ahead with our in further delays let me do my best again to try to explain to you why you do not need an LLC starting with this question here I am going to do my best to break down what exactly is an LLC so let's go ahead and start with the basic understanding of what it is and LLC is a state-level entity meaning that it is formed and recognized only at the state not at the federal level as a matter of fact when it comes to the government initially the federal government treats you like you know you're a piece of lint on their shirt I just kind of flick your weight everybody don't pay attention to you there you know get out of here we don't recognize you don't know what you are and if you want to be recognized by the federal government the IRS you are going to have to fill out some additional paperwork the only exception to that meaning that you won't be required to fill out additional paperwork in order to be recognized is if you and another individual they are the ones who are forming this this LLC together making it a multi-member LLC you will then be automatically recognized as a partnership meaning that the IRS is going to treat you as a partnership you're gonna have them file a partnership tax return meaning that the earnings and income is going to be reported on a 1065 each individual gets a k1 and you go on from there that is the only exception to the rule of being recognized by an IRS you becoming a multi-member LLC outside of that everything else is the same so as you can see just by forming an LLC it's not going to give you corporation status which is the first reason why you don't need an LLC all right so moving on next let's break down the name l.l.c which stands for limited liability company and for purposes of breaking down the night I'm actually going to do it in reverse order going to start with the C and work our way up so looking at the letter C we can see that C stand how about there we can see that C that's C stands for company not corporation okay we can see that's a very distinctive difference LLC is a limited liability company not a corporation however this just reiterates what I said in the beginning LLC's are state-level entities not initially recognized by the federal government okay does that really make a difference on anything no not really I just started with something you know something for for you to know what here okay so anyway moving on next one the two ales the limited and the liability I'm grouping these together right now because those two words together limited and liability or would cause people to drool over this particular business structure the words limited in liability to most equal asset protection and truthfully speaking it is if done right but then when it comes to asset protection it leads me to ask the question what exactly is an asset well according to Google and asset is property owned by a person or a company regarded as having value and available to me debts commitments or legacies now let me go ahead and break that down because when it comes to forming LLC's that is the biggest reason why people want to form LLC they always say they want to protect their assets and then it it kind of I don't want to sell meat or anything but I'm like you know we really got to go through it and understand what an asset is do you really have any assets to protect meaning that if you're renting you don't own the building right you're you're renting if you you don't own it it's not your asset if you are still paying your Cardinal or you're leasing the vehicle you don't own that you don't own the vehicle if you think I'm playing don't pay the card no don't pay the lease agreement see what happens remember an asset is something that you own all right free and clear you have the title you're you it's is yours you have the pink slip renting and and still paying Cardinals that is not an asset even if you were in a house and you're paying a mortgage you don't own that home until the mortgage is paid off again if you think I'm playing don't pay their mortgage and see what happens you need to own it free and clear in order for it to be considered your asset so think about that when you're trying to say hey I need asset protection do you really have any assets yes we may own jewelry and things like that but if it's not worth you know thousands of dollars then are you really trying to protect this so if you're thinking of starting an LLC just for purposes of asset protection really doing inventory and see what assets do you have think about can you convert that item that you're thinking about can you convert it immediately into cash to pay a

Thanks Tim your participation is very much appreciated
- Aldo Eckroad

About the author

Aldo Eckroad

I've studied noncommutative geometry at James Madison University in Harrisonburg and I am an expert in theoretical biology. I usually feel ecstatic. My previous job was physician's assistant (pa) I held this position for 15 years, I love talking about rail transport modelling and yard games. Huge fan of Hugh Hefner I practice pilates and collect radio premiums.

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