EDIT: 2022/14/2: We did not mention that Florida and many other states have their own laws that negated the ability for decent asset protection regarding creditors for Single Member LLCs. Be aware of this when creating a Single Member LLC in florida
Keep in mind each state is different and has their own laws surrounding LLCs
This post is directed at Single member LLCs (one person deciding on creating an LLC for themselves).
NOTE: LLC stands for Limited Liability Company
NOTE: Unless where otherwise stated, this information does not apply to a specific state.
Why This Topic
There are often many misconceptions about the requirements and additional laws that pertain to your business when starting an LLC and this post looks at addressing some of them
While Overwatch Media will let you pay them to help you file for an LLC, they feel that it is fully doable to file for an LLC yourself and keep it updated.
* Disclaimer 1: The following quoted areas may not be direct quotes, however, the original person quoted has agreed to our paraphrasing. Names may have been changed for privacy
* Disclaimer 2: The information you read on our site is for informational purposes only. We are not doctors or lawyers and are not experts. All information is based on our research, experience, and knowledge we were taught. We suggest that you confirm any information that we provide to ensure it is still relevant and factual based on present day resources and recommendations of professionals. Our recommendation is to use peer reviewed scholarly research to get the most accurate information and reach out to a professional near you.
The process to File an LLC
Each state has a different process. Most states should have an online application though, making it easier and faster to get your business registered. From our team at Overwatch Media, “you simply provide the name of the business, the address, and other personal information about you as the owner.” What’s next? You fill in your payment information and you are done. That is the process for Florida and a few other states. However, you can always contact your state or visit your states website and search for their instructions to ensure you have all the steps covered.
The cost of an LLC
The cost of an LLC depends on a few factors. Are you doing it yourself or are you hiring someone or a company like LegalZoom to do it for you? The cost will also depends on the state you are registering with.
To first register the LLC you may pay around $100 in many states, and then around $100 once per year to keep the company active with your state. However, do check with your state before seeking (specifically paying) for advice, because some states like California require a minimum of $800 each year for special taxes.
Be cautious on who you go through, since some places charge a hefty fee or fees that can just be avoided to begin with. LegalZoom has packages that charge $79 for an operating agreement and $59 in addition to file for an EIN (Employment Identification Number). With only a few moments of your time, you can get the EIN yourself, and there will be no fees to pay.
What about Extra taxes you have to pay as an LLC? Aside from select states like California, the only extra money you have to spend on taxes is the small cost to register the business and to keep it active. There are no special federal taxes you have to pay just because you are now an LLC as opposed to an individual owner. The only time you may have to pay more taxes (and in some cases less taxes) is if you request the IRS to treat you like a corporation on your taxes.
This cost can be slightly higher though since you need what is called a Registered Agent. You must consider if an LLC is within the budget with your specific scenario. A registered agent can be yourself, however, whatever address provided must be an address where someone has agreed to sign for packages and is at the address during typical business hours of your state. If you or an employee are in the office during these times, then the cost can be zero. If you must pay an outside provider then do your research. While LegalZoom may charge you $399 each year to be your registered agent, ask your local accountant if they have that as a service because many provide such a service free of charge. Otherwise, your lawyer or any local lawyer should have such a service at a much cheaper rate than LegalZoom. Keep in mind though, with lawyers it is typical practice to have to hire them on retainer. Meaning you will prepay for future services.
Benefits of an LLC
Some might say it helps you look professional, however, one benefit is not using your personal information to open accounts, and the other benefit (the main benefit)of forming an LLC is that it helps protect your personal assets. Unless you gave a personal guarantee, an LLC can protect your car, home, and personal bank accounts from basic lawsuits and faulting on a loan as long as you did not commit a personal wrongdoing.
EDIT: Keep in mind this is not the case in several states. You will not have your assets protected if you default on a loan/creditor
There is one caveat to this benefit of protection. It is imperative that you keep your LLC separate from your personal life. By this we mean, your business needs to have its own bank account and credit cards. Money that is in your business bank account is for business only and not for personal use and that goes the other way around. So using your personal debit card to make a business purchase would be a big no go and potentially remove any protections you had.
Some takeaways and Suggestions.
You should not outright throw away the idea of starting or transforming your company to an LLC. If you do make your company an LLC, keep your business and personal assets separate. Do your research to see if the cost is reasonable in your state; and keep your business active by filing each year.