topic Re: Im looking to start a LLC need answers in Business Credit

Im looking to start a LLC need answers

Legions36 — Fri, 01 Nov 2013 17:09:51 GMT

I want to start a LLC to say do all my investing into 1 company. Like for instance if i buy and sell cars, i do side painting jobs, i make money elsewhere, i sell on ebay, or pretty much anything else i make money from. What would be the best way to go about it because i want to be able to have this all into 1 category.
I was looking at having some kind on investing kind of company but i read that u need certain licenses and its regulated in some way, which is not what i want.
This is also to build my credit as well because i need to show some kind of proof of income and this would be the perfect way to deal with what im looking to acomplish.

Any info is greatly appreciated. Thanks

Re: Im looking to start a LLC need answers

Anonymous — Fri, 01 Nov 2013 21:05:58 GMT

I have an LLC myself.

There are several basic things you need to do. One is to keep good business records, separate from your personal income and expenses. Another key thing is to find out the state and local licensing requirements. For example, things like sales tax and home occupancy licenses.

You would typically file your taxes on a Schedule C with the IRS, and would need to substantiate your business income and expenses.

As far as credit goes, you would typically show proof of income by your previous two years of tax returns. This is often not required when getting a CC. Small business CCs nearly always require a PG, where you are personally liable.

Re: Im looking to start a LLC need answers

scenery_guy — Sat, 02 Nov 2013 16:27:06 GMT

Why do you think you need a LLC? It's a lot of extra paperwork both now for start up and every tax season. Here is a brief comparison. Honestly you would be fine as a sole proprietor. You should apply for a Federal EIN and here is the location to get started.

Feel free to ask more questions and I will try to help as I can. Over the past 20+ years I have had a C Corp, S Corp, a LLC partnership and have been a sole proprietor. Easiest by far (for my needs) is sole proprietor. Reporting gross sales in excess of 1MM per year and no issues with IRS or business banking. One tax return as a sole proprietor, business and personal money does not need to be kept separate (but I do thru business credit cards and banking accounts) and there are some pretty sweet perks as far as tax deductions.

Re: Im looking to start a LLC need answers

Legions36 — Sun, 03 Nov 2013 07:42:46 GMT

@scenery_guy wrote:
Why do you think you need a LLC? It's a lot of extra paperwork both now for start up and every tax season. Here is a brief comparison. Honestly you would be fine as a sole proprietor. You should apply for a Federal EIN and here is the location to get started.

Feel free to ask more questions and I will try to help as I can. Over the past 20+ years I have had a C Corp, S Corp, a LLC partnership and have been a sole proprietor. Easiest by far (for my needs) is sole proprietor. Reporting gross sales in excess of 1MM per year and no issues with IRS or business banking. One tax return as a sole proprietor, business and personal money does not need to be kept separate (but I do thru business credit cards and banking accounts) and there are some pretty sweet perks as far as tax deductions.

Well what im looking to do is be able to give myself paychecks for amounts that i make money. To be honest I really don't want to have to keep records for the money that i make thru the business, i just want to do the taxes thru paychecks like im working and then not really have to do to much thru the company other than create credit. To be honest i'm just going to start it from my home address and take it from there.

Let me ask u if i do the (sole prop) do i need to to thru the whole setup process like an LLC? They want me to pay certain fees like how legalzoom has.

Thanks for your help and if i could save myself time and money right now that would be great, your probably right about that. I think you have a good idea at what im trying to do.

Re: Im looking to start a LLC need answers

scenery_guy — Sun, 03 Nov 2013 17:18:00 GMT

@Legions36 wrote:
@scenery_guy wrote:
Why do you think you need a LLC? It's a lot of extra paperwork both now for start up and every tax season. Here is a brief comparison. Honestly you would be fine as a sole proprietor. You should apply for a Federal EIN and here is the location to get started.

Feel free to ask more questions and I will try to help as I can. Over the past 20+ years I have had a C Corp, S Corp, a LLC partnership and have been a sole proprietor. Easiest by far (for my needs) is sole proprietor. Reporting gross sales in excess of 1MM per year and no issues with IRS or business banking. One tax return as a sole proprietor, business and personal money does not need to be kept separate (but I do thru business credit cards and banking accounts) and there are some pretty sweet perks as far as tax deductions.
Well what im looking to do is be able to give myself paychecks for amounts that i make money. To be honest I really don't want to have to keep records for the money that i make thru the business, i just want to do the taxes thru paychecks like im working and then not really have to do to much thru the company other than create credit. To be honest i'm just going to start it from my home address and take it from there.
Let me ask u if i do the (sole prop) do i need to to thru the whole setup process like an LLC? They want me to pay certain fees like how legalzoom has.
Thanks for your help and if i could save myself time and money right now that would be great, your probably right about that. I think you have a good idea at what im trying to do.

Skip the whole Legal Zoom thing, it's a waste of funds. Depending on where you live (I am in Florida) setting up a sole proprietor is simple. You can do this to test the waters and see if you really want a business without an outlay of cash. Honestly many people start up but fail in a few years (not pointing at you, I failed on my first try). Closing a sole proprietor is a simple as not doing what you were doing and letting the IRS know you are closed.

With a sole proprietorship the funds can mingle as there is no separation of personal and business funds. I understand you want a paycheck but there will be some additional steps to cut yourself a check and have taxes withheld. You can always claim all sales as personal income (you will be dong this anyhow see #7 below) and when you apply for a credit card you indicate you are a sole proprietor and provide both SSN and FEIN and then provide your gross sales as your gross income. You can also provide other sources of income if you have them.

If you really want a paycheck then I suggest you look into a PEO to handle the payroll. Messing with remitting payroll taxes just plain sucks. If you screw it up the IRS will be all over you quickly. A PEO or payroll company (sometimes called employee leasing) will take funds from you and then cut you a paycheck. They will charge you a percentage to cover taxes, cost of direct deposits or paper checks and a profit for their services. I use a PEO and it's great. I have employees and I could do it myself but I have better things to do with my time than fill out forms and remit payroll taxes and other stuff. This will be important if you ever need employees as it's the only insulation you have as far as liability. The employees technically and legally worth for the PEO and you are just leasing them. If something goes bad (and eventually it will as we are talking employees here) then the PEO handles it all. You are untouched.

Google "opening a sole proprietor business in (your state) and you will find some helpful stuff. Here is my simple take:

1. First you need a Federal EIN as that makes your business official in the eyes of the Feds. No cost. Apply, fill out what you will be doing and you get the number instantly online. Print it out and save a copy as a PDF as you will not get a copy in the mail. Do not misplace this form as it's a pain to get it again.

2. Before you go much farther you need to decide if you will have a fictitious name for the business (Joe's Great Stuff) or if you will just be using your own name. If you want to name your business then you need to file for a fictitious name with the state and county (depending on where you live). It can be a simple as filing one form and then advertising in a local paper that you will be doing business as (insert company name). The paper knows what to do, just call advertising and tell them you are advertising a fictitious name.

3. You need to search and see if your state requires registering your business. In Florida it was not required for me to register with the state as a SP in my own name but I did as I was able to receive a special sales tax exemption if I did.

4. If you will be buying and selling stuff a sales tax certificate (sales tax number) might be required. It allows you to purchase stuff for use or resale and not have to pay tax at point of purchase. It also requites you to be an agent for the state and collect and remit sales tax. It's simple to do and can be done online for the most part. DO NOT SCREW UP WITH SALES TAX, EITHER FILING ON TIME OR NOT REMITTING THE FUNDS YOU COLLECT. The state does not screw around so be responsible (yes, I messed this up to years ago).

5. You will need an occupational license (sometimes called business tax receipt). Might need for city and county. Look on your city and county web sites for all the info. Using your home address is OK. This renews yearly, simple to pay and renew. Remember you are in business and everyone wants their cut. City and county no exception.

6. Open a bank account for the business. You could skip this step as a sole proprietor (I have used one account for everything in the past but it's simpler for me to have a dedicated account and the services of a business banker now that I have good sales to show). If you decide to open a separate account make sure it's a zero fee account as nobody likes paying fees, perhaps use same bank as your personal accounts. If you are serious about building business credit you need a separate account.

7. Keep good records of purchases and sales and be prepared for a much more strenuous IRS filing as there are many more forms that need to be filled out. All sales are reported as personal income. Look into a tax filing software like TurboTax for personal and business. It's a good product and it will step you thru everything you need to complete. Or hire a tax person if you think you might screw it up. DON'T SCREW UP YOUR FEDERAL TAXES. DO NOT CROSS THE IRS - EVER! (Yes, I did this one years ago). Look into paying estimated federal taxes quarterly if you need to as one big check can be tough to write come April of next year.

Hope this helps or get's you started.

Re: Im looking to start a LLC need answers

Legions36 — Fri, 08 Nov 2013 06:14:22 GMT

Thanks for all this info. I wanted to get back earlier but i had family in town and it was hectic the last week. After researching what you have said i have learned that this will work great for me. I didn't realize I could also build business credit in the same way as an LLC.

Re: Im looking to start a LLC need answers

scenery_guy — Fri, 08 Nov 2013 17:47:58 GMT

Awesome, good luck and stay in touch!

Re: Im looking to start a LLC need answers

Legions36 — Fri, 08 Nov 2013 19:42:08 GMT

@scenery_guy wrote:
Awesome, good luck and stay in touch!

One question that is just left in the air. When u applied for cc's under sole prop was it any different than a LLC, say in limits or questions?

Re: Im looking to start a LLC need answers

scenery_guy — Sat, 09 Nov 2013 04:30:02 GMT

@Legions36 wrote:
@scenery_guy wrote:
Awesome, good luck and stay in touch!
One question that is just left in the air. When u applied for cc's under sole prop was it any different than a LLC, say in limits or questions?

Nothing different besides limits based on earnings (my speculations on the limits based on earnings and not confirmed by bank). Questions were the same for the most part as my LLC was a partnership so as a SP I did not need to go over partnership like in past.

Re: Im looking to start a LLC need answers

jetsfan2013 — Mon, 25 Nov 2013 10:47:19 GMT

This is some great detailed advice scenery guy! I am in FL as well now, and am in the process of establishing a side business for my web design. I have been weighing the options of LLC vs S Corp, not thinking about the sole prop option. My concern was personal liability, as I have not heard being a sole prop you are covered. Is that true?

Re: Im looking to start a LLC need answers

Swapmeet — Tue, 26 Nov 2013 07:13:19 GMT

@jetsfan2013 wrote:
This is some great detailed advice scenery guy! I am in FL as well now, and am in the process of establishing a side business for my web design. I have been weighing the options of LLC vs S Corp., not thinking about the sole prop option. My concern was personal liability, as I have not heard being a sole prop you are covered. Is that true?

This is absolutely true. You can get insurance, but if you are sued over and beyond what your insurance covers then you are liable. Liability is my chief concern since my real (not paper) investments include real estate that is leased out to the general public. There are so many things that can happen on a rental property that I would never consider being a sole proprietor. I think that Sceneryguy is absolutely correct in his advice to the OP. One must look closely and objectively at one's own venture, and decide what would work for their situation. Further, one can always change the business type if their needs change.

In my situation, I wanted to form a different entity that is separate and distinct from me--protecting myself completely from any liability. Since there are separate facets of my investment strategy, there are separate LLCs that operate those. So I have one LLC that acts as the holding company for all other LLCs. Each property is held by its own LLC (formed in Wyoming and operating in CA). This way, my liability for each property is contained. As was mentioned earlier, this creates a decent amount of paperwork. Quickbooks doesn't mind, and when you are bringing in enough money, craigslist has plenty of people that are interested in bi-weekly or monthly bookkeeping jobs which will cost between 100 and 200 bucks per month.

So each individual investment is owned by its own LLC, and each LLC is owned by the holding company LLC--which I don't even own (that is a different conversation). Take my information with a grain of salt because while I have controlled some C-Corps and several LLCs, the liability issue has always dis-sueded me from being a sole-proprietor--only because I never felt like it would benefit my situation (one with plenty of liability). Once again, one must look at their own situation because being a sole proprietor does sound reasonable for what the OP was talking about doing i.e.. Buying and selling cars.

Re: Im looking to start a LLC need answers

scenery_guy — Tue, 26 Nov 2013 03:06:38 GMT

@jetsfan2013 wrote:
This is some great detailed advice scenery guy! I am in FL as well now, and am in the process of establishing a side business for my web design. I have been weighing the options of LLC vs S Corp, not thinking about the sole prop option. My concern was personal liability, as I have not heard being a sole prop you are covered. Is that true?

As Swapmeet detailed above this post one must consider the exposure you are willing to accept when picking the entity. My assets are protected very well and all of my decisions were based on Florida law as that's where I operate. As a SP I am comfortable with my exposure and I carry sufficient insurance for the unexpected. I do some fairly high profile project for some large clients (Superbowls for NBC as an example) so my exposure is huge. Again I am comfortable as I don't put myself in a situation that exposes me more than my plan, and all contracts generated by a client (NBC as an example) go to my lawyer for review and amending. If my changes are not accepted I simply move on, and that rarely happens.

I'm not sure what liability concerns you have as a web designer but they can't be much. Research the laws in your state, invest in a consultation with a good lawyer who specializes in business law and see what they think. You might be able to have them help you draft a great contract that you use for all clients that serves as a firewall in most circumstances (that's what I did).

In the end go for the simplest route federal tax wise that gives you comfort. After 22 years doing what I do (thru several companies I formed) I have been sued once, and it was over an overdue bill for supplies that I planned on paying but it seemed our verbal agreement for a delay due to a hardship (customer stiffed me for a little over $100,000K) was not sufficient. The court accepted my earlier proposed terms so the lawsuit just delayed the eventual payment in full by the time it took to go to court.