LLCs

Limited Liability Company

What’s a Tax ID number?

I find that this is much more critical than some people think. A tax ID number is your corporation or LLC’s separate tax identity. Whether it’s opening a bank account, setting up payroll, or filing a tax return, this number is THE number for all purposes. Here’s how you can get one (good luck to you) or here's how you can get one (answered by me). Important note: you need some kind of tax identification to get a Tax ID Number. Usually that original identification comes in the form of an individual's Social Security Number (usually the person forming the entity if it's a small business). But foreign owners have a more difficult time doing this since they don't usually have Social Security Numbers; in that case, they need to apply for an individual tax ID number, and then use that number to get the Tax ID Number for the corporation or LLC.

By | June 15th, 2015|0 Comments

How do I get a tax identification number?

You can go to the IRS’s website, and go through their multi-page question and answer pages. Make sure you're ready with your SS-4, as the IRS may ask for that over the phone if it doesn’t like one of your answers. (PS, the IRS is not in the habit of liking.)

By | June 15th, 2015|0 Comments

What’s an assignment?

An assignment is a document used to transfer assets from one entity or owner to another. Click here to see if you need one.

By | June 15th, 2015|0 Comments

What’s a capital contribution?

In its most basic terms, this is the money (or sometimes the assets, like equipment) you put into your business. It differs from a loan in that it doesn’t accrue interest payable to you. If you put money into your corporation or LLC (or partnership), then the return of that money to you as you start to distribute money to you, is non-taxable.

By | June 15th, 2015|0 Comments

Do I have to make a capital contribution?

No, a capital contribution isn't necessary. But typically you would, and should, make one. You would because there’s almost no way to start a business with zero invested in it. And you should because if your corporation is “under-capitalized”, then you could be exposing yourself and fellow shareholders or members to personal liability, making the formation of the entity a waste of time and money. And it takes more than $1.00 to protect yourself (but nice try).

By | June 15th, 2015|0 Comments

Will putting my personal residence into an LLC protect it from my creditors?

Sorry, but . . . LOL – no. People do try this, though. The purpose of an LLC, and therefore what it ultimately protects, by law, is the business that’s operating inside it. Unless you have turned your personal residence into a business (not really a personal residence anymore), then it’s not protectable this way. However, one of the main reasons people put their business into an LLC is to protect their personal assets, like their home. Nice try, though.

By | June 15th, 2015|0 Comments

Is my business big enough to justify the additional overhead of a corporation or LLC?

“Big” is a relative term. Size isn’t always the only, or even a significant, element to determining whether you should entity-ize your business. If you run a small business, but it’s a high-risk business, like, for example, a liquor store, then an LLC or corporation is probably a good idea, regardless of your revenue.

By | July 12th, 2015|0 Comments

I’ve heard that California has limitations on what type of business can be operated through an LLC. Is that true?

True! California has placed a limit on what businesses can be operated out of an LLC. The general rule is no professionals, and though typically the rules point to any professional named in California’s Business and Professions Code, there are some exceptions. One exception is contractors; additionally, some “professions” that don’t require testing, experience, or certain skills may also be exempt.

By | July 12th, 2015|0 Comments

How long does it take to form a corporation or LLC, in California? What about other states?

California varies – sometimes it’s a matter of days, but sometimes, especially at the beginning of the year, it can take a couple weeks. You can always submit your documents on a rush (24 hours or even same day) basis. Other states? It really depends. Delaware’s quick.

By | July 12th, 2015|0 Comments

Is there a lot of paperwork? Do I have to do it all?

There’s some paperwork . . . corporations tend to have more paperwork, which is why some people might immediately gravitate to LLCs, or nothing at all. And, yes, if you want to maintain your status as a corporation, and maintain your limited liability, don’t cut corners on the paperwork. It’s important.

By | July 12th, 2015|0 Comments