I paid an attorney $500 to set up an LLC. Basically he made a two page document, had it notarized and then sent it to the state. He paid the state about $140 so he made $360. He probably had the form in his computer and did nothing more than change the name. If you know someone that has an LLC, then perhaps you could just copy theirs, change the name, and send it in yourself. According to my lawyer, you want to make it as generic as possible. The state government should have a website detailing the requirements. Setting up the LLC with the state is pretty easy. After that you have to fill out an SS4 form and figure out how you want it taxed. Personally, I have found much more info from this website than the attorney provided. It really boils down to how much your time is worth. If you just pay someone about $360 for their time they will take care of it for you and answer some of your questions.
You can find books or software on forming an LLC. Just make sure you can use it in your state.
Examples:
Amazon
EZ-Legal
2nd April, 2003
Before running off and forming an LLC, do some research on California LLCs. I think you will find the franchise tax/filing fee California charges is not very attractive. Like a few other states, they base their fees on the value of the assets in the LLC.
As far as getting an attorney to set up the LLC or not, the question is do you want a creditor to pierce through the LLC or not? Shop around and find out what the attorney will do for his fee. Remember, the attorney's fee is for more than drafting the document. Generally he has to take his time to explain how to use the entity. If the attorney is unavailable to do this, find a different attorney. Quick frankly, you will probably need an attorney in the future and it is always nice to have a working relationship with someone you trust and someone that can offer you some business advice in the process. That way if something goes bad and you need some quick legal advice, you have someone to call that you trust.
I would recommend that if you do use an attorney, get an attorney that will draft the following documents for your LLC: (i) articles of organization; (ii) an operating agreement, (iii) (in some states) a member control agreement, (iv) first minutes of the managing member of the LLC, (v) membership certificates (like stock certificates), and (vi) filing the tax paperwork. If this is only a single member LLC, this should not cost very much, depending on what state you form the LLC. I generally charge my clients about $500-$700 for all of those documents (that includes the $125-$155 state filing fee).
Too many people believe that if you file just the articles of organization, you are fine. Well, you probably are until you are sued and the attorney is asking th court to "pierce the LLC veil" and to get a judgment applied directly against the LLC assets. The lesson here is that not ownly do you have the run the LLC correctly and not treat it as your alter-ego, but you have to follow the formalities that your state has set up for getting the limited liability protection that the LLC gives you.
On the CA LLC: The problem isn't so much with the franchise tax ($800 per year) but with the gross receipts tax. Another words they tax you on your sales which can be a problem if you are selling CA home (expensive!) and then doing a lot of them. I'm still trying to figure out if this only applies to "inventory" type product which I think is the case, hence the name "receipts". So maybe if you use an LLC to hold property and sell one every once in a while it won't be considered "inventory" so no tax.
As far as taxing Assets, I don't believe that is correct....
Not if you are doing business in California because California still can still tax a Nevada LLC in California on its California income. Also, the Nevada LLC will have to qualify to do business in California by filing as a foreign LLC with the California secretary of state.
To avoid the franchise tax (even if it is only $800 which is substantially higher than most other states) or the gross receipts tax, look into forming a limited partnership with an S corporation owning a 1% partnership interest as the sole general partner.
You're setting up the LLC for protection, right? Sure you can save yourself $100, buy when you get sued, you may find out that you did something slightly wrong and that you don't have the protection that you assumed you did.
Also, LLC's have to do certain things so that they don't look like a corporation. If you don't do these things quite right, the IRS will say that you're a corporation and then you'll be taxed like one (and probably loose more than $100).
Most people recommend doing an LLC out of Nevada or Delaware, as they are both tax and LLC friendly. (I don't yet have an opinion on this, but would like to hear others).
Find an attorney who specializes in Real Estate law, and have him create it for you. You'll be $100 poorer in the short run, but you'll get what you need and what you paid for. Good Luck.
8th April, 2003
hibby76:
Allow me to comment on some of your advice. Although I know your advice is well meaning, some of it is not entirely accurate, so I would like to prevent some misunderstandings readers may have when reading your post.
"Also, LLC's have to do certain things so that they don't look like a corporation. If you don't do these things quite right, the IRS will say that you're a corporation and then you'll be taxed like one (and probably loose more than $100)."
With the "check the box" rules, the IRS will consider the LLC a corporation only if you file the IRS Form 8832 (i.e., check the box form) to treat the domestically formed LLC as a corporation.
"Most people recommend doing an LLC out of Nevada or Delaware, as they are both tax and LLC friendly. (I don't yet have an opinion on this, but would like to hear others)."
While it is true that both Nevada and Delaware are STATE tax and LLC friendly, forming an LLC in those states will not usually save any taxes. First, the IRS will still tax the income because the Internal Revenue Code makes no distinction of where the LLC is formed. Second, even if you have no entity level tax because, e.g., Nevada has no state income tax, nevertheless, since the LLC is a flow through vehicle, you will have to claim the LLC's income on your PERSONAL state income tax return.
"Find an attorney who specializes in Real Estate law, and have him create it for you. You'll be $100 poorer in the short run, but you'll get what you need and what you paid for. Good Luck.
[/quote]"
Actually, find a business attorney that is versed in corporate, tax and LLC law. Most true real estate lawyers (i.e., dirt lawyers) do not know the nuisances of these types of entities and the tax law unless they also practice in those areas.
The form to file anLLC in the state of TX seem very simple. The only variable in filling out the form is a section titled "Special Provisions." Can anyone tell what special things an attorney would put here? I would like to fill in the forms myself and just have an attorney review everything for me.
There are definate advantages to filing in Nevada. I would personally file a C corp in Nevada. Bronchick has aprogram that tells you how to create a "bulletproof corp". The reason being that there is no state tax, and the first 50K is taxed at 15% Additionally you can save another 6% or more by not having to pay SSN or self employment taxes . which adds up to a big savings for you the taxpayer.
You don't have to pay CA taxes on it either if you structure it right. Use an LLC to do business in CA and pay the Nevada C Corp ( let the C Corp pay your monthly bills, supplies, car lease, etc. )through that thus lowering your taxible CA income.
Additionally if you want to get real creative put your property into a your LLC or Land trust and then equity strip it to your C corp through a 2nd or a lien and then if you do get sued you will show no equity in the property and a contingency attorney will not want to waste his time.
This must be done prior to the suit however as doing otherwise would probably have statute of frauds issues.
C corps have far less chance of an IRS audit as well. ALmost 9 times less than a LLC.
I would say that it would be worth everyone's time to study up on the asset protection issue for themselves. I would also get my CPA and maybe a lawyer on board but not trust them too much. I mind my own store and frequently catch them overlooking things. Find ones that specialize in these things not just the generic run of the mill variety.
On 110k this last year I needlessly paid out 7500 too much in taxes for not following the above mentioned routine. When I mo0ved to another state I let my C corp lapse.
I paid an attorney $500 to set up an LLC. Basically he made a two page document, had it notarized and then sent it to the state. He paid the state about $140 so he made $360. He probably had the form in his computer and did nothing more than change the name. If you know someone that has an LLC, then perhaps you could just copy theirs, change the name, and send it in yourself. According to my lawyer, you want to make it as generic as possible. The state government should have a website detailing the requirements. Setting up the LLC with the state is pretty easy. After that you have to fill out an SS4 form and figure out how you want it taxed. Personally, I have found much more info from this website than the attorney provided. It really boils down to how much your time is worth. If you just pay someone about $360 for their time they will take care of it for you and answer some of your questions.
You can find books or software on forming an LLC. Just make sure you can use it in your state.
Examples:
Amazon
EZ-Legal
Before running off and forming an LLC, do some research on California LLCs. I think you will find the franchise tax/filing fee California charges is not very attractive. Like a few other states, they base their fees on the value of the assets in the LLC.
As far as getting an attorney to set up the LLC or not, the question is do you want a creditor to pierce through the LLC or not? Shop around and find out what the attorney will do for his fee. Remember, the attorney's fee is for more than drafting the document. Generally he has to take his time to explain how to use the entity. If the attorney is unavailable to do this, find a different attorney. Quick frankly, you will probably need an attorney in the future and it is always nice to have a working relationship with someone you trust and someone that can offer you some business advice in the process. That way if something goes bad and you need some quick legal advice, you have someone to call that you trust.
I would recommend that if you do use an attorney, get an attorney that will draft the following documents for your LLC: (i) articles of organization; (ii) an operating agreement, (iii) (in some states) a member control agreement, (iv) first minutes of the managing member of the LLC, (v) membership certificates (like stock certificates), and (vi) filing the tax paperwork. If this is only a single member LLC, this should not cost very much, depending on what state you form the LLC. I generally charge my clients about $500-$700 for all of those documents (that includes the $125-$155 state filing fee).
Too many people believe that if you file just the articles of organization, you are fine. Well, you probably are until you are sued and the attorney is asking th court to "pierce the LLC veil" and to get a judgment applied directly against the LLC assets. The lesson here is that not ownly do you have the run the LLC correctly and not treat it as your alter-ego, but you have to follow the formalities that your state has set up for getting the limited liability protection that the LLC gives you.
Hope that helps,
Taxjunkie
On the CA LLC: The problem isn't so much with the franchise tax ($800 per year) but with the gross receipts tax. Another words they tax you on your sales which can be a problem if you are selling CA home (expensive!) and then doing a lot of them. I'm still trying to figure out if this only applies to "inventory" type product which I think is the case, hence the name "receipts". So maybe if you use an LLC to hold property and sell one every once in a while it won't be considered "inventory" so no tax.
As far as taxing Assets, I don't believe that is correct....
jom
Tasjunkie, I appreciate the advice.
Does it make more sense to set-up LLC in Nevada?
Thanks, Alexander.
Quote:
On 2003-04-02 12:18, agabovich wrote:
Tasjunkie, I appreciate the advice.
Does it make more sense to set-up LLC in Nevada?
Thanks, Alexander.
Not if you are doing business in California because California still can still tax a Nevada LLC in California on its California income. Also, the Nevada LLC will have to qualify to do business in California by filing as a foreign LLC with the California secretary of state.
To avoid the franchise tax (even if it is only $800 which is substantially higher than most other states) or the gross receipts tax, look into forming a limited partnership with an S corporation owning a 1% partnership interest as the sole general partner.
Hope that helps,
Taxjunkie
Taxjunkie. Thank you for all your help.
Alexander.
I agree with taxjunkie
You're setting up the LLC for protection, right? Sure you can save yourself $100, buy when you get sued, you may find out that you did something slightly wrong and that you don't have the protection that you assumed you did.
Also, LLC's have to do certain things so that they don't look like a corporation. If you don't do these things quite right, the IRS will say that you're a corporation and then you'll be taxed like one (and probably loose more than $100).
Most people recommend doing an LLC out of Nevada or Delaware, as they are both tax and LLC friendly. (I don't yet have an opinion on this, but would like to hear others).
Find an attorney who specializes in Real Estate law, and have him create it for you. You'll be $100 poorer in the short run, but you'll get what you need and what you paid for. Good Luck.
hibby76:
Allow me to comment on some of your advice. Although I know your advice is well meaning, some of it is not entirely accurate, so I would like to prevent some misunderstandings readers may have when reading your post.
"Also, LLC's have to do certain things so that they don't look like a corporation. If you don't do these things quite right, the IRS will say that you're a corporation and then you'll be taxed like one (and probably loose more than $100)."
With the "check the box" rules, the IRS will consider the LLC a corporation only if you file the IRS Form 8832 (i.e., check the box form) to treat the domestically formed LLC as a corporation.
"Most people recommend doing an LLC out of Nevada or Delaware, as they are both tax and LLC friendly. (I don't yet have an opinion on this, but would like to hear others)."
While it is true that both Nevada and Delaware are STATE tax and LLC friendly, forming an LLC in those states will not usually save any taxes. First, the IRS will still tax the income because the Internal Revenue Code makes no distinction of where the LLC is formed. Second, even if you have no entity level tax because, e.g., Nevada has no state income tax, nevertheless, since the LLC is a flow through vehicle, you will have to claim the LLC's income on your PERSONAL state income tax return.
"Find an attorney who specializes in Real Estate law, and have him create it for you. You'll be $100 poorer in the short run, but you'll get what you need and what you paid for. Good Luck.
[/quote]"
Actually, find a business attorney that is versed in corporate, tax and LLC law. Most true real estate lawyers (i.e., dirt lawyers) do not know the nuisances of these types of entities and the tax law unless they also practice in those areas.
Good luck,
Taxjunkie
Thanks for the corrections. I appreciate it.
Hi, Contact your "secretary of state" website. in my state they have all the correct forms and instructions on filing for your corp or llc.
Good luck, Coolage
The form to file anLLC in the state of TX seem very simple. The only variable in filling out the form is a section titled "Special Provisions." Can anyone tell what special things an attorney would put here? I would like to fill in the forms myself and just have an attorney review everything for me.
There are definate advantages to filing in Nevada. I would personally file a C corp in Nevada. Bronchick has aprogram that tells you how to create a "bulletproof corp". The reason being that there is no state tax, and the first 50K is taxed at 15% Additionally you can save another 6% or more by not having to pay SSN or self employment taxes . which adds up to a big savings for you the taxpayer.
You don't have to pay CA taxes on it either if you structure it right. Use an LLC to do business in CA and pay the Nevada C Corp ( let the C Corp pay your monthly bills, supplies, car lease, etc. )through that thus lowering your taxible CA income.
Additionally if you want to get real creative put your property into a your LLC or Land trust and then equity strip it to your C corp through a 2nd or a lien and then if you do get sued you will show no equity in the property and a contingency attorney will not want to waste his time.
This must be done prior to the suit however as doing otherwise would probably have statute of frauds issues.
C corps have far less chance of an IRS audit as well. ALmost 9 times less than a LLC.
I would say that it would be worth everyone's time to study up on the asset protection issue for themselves. I would also get my CPA and maybe a lawyer on board but not trust them too much. I mind my own store and frequently catch them overlooking things. Find ones that specialize in these things not just the generic run of the mill variety.
On 110k this last year I needlessly paid out 7500 too much in taxes for not following the above mentioned routine. When I mo0ved to another state I let my C corp lapse.
Live and learn!
[addsig]