One Man LLC Question
Ok, I have a LLC where I keep all profits from investing(flips, rehabs, etc) and its my only source of income. So naturally I draw from the LLC to pay my mortgage, bills, stocks, etc...
Do I need to pay myself a monthly salary like a corporation?? is there anything to stop someone(me) from "funneling" the majority of money out of their LLC thus limiting their potential loss if the LLC is sued???? cause what if I made 50k and used 40k for lifes expenses...then my llc would be worth only 10k..seems too easy ..confused...thanks
You need to stop paying personal bills out of the LLC. One part of the protection of the LLC is that it is a separate "person". If you treat it as merely an extension of yourself the court is much more likely to pierce the veil of the corporation and rule that you are personally liable.
Set up a separate checking account in your name. Write a check from the LLC to yourself, pay your bills out of that account. Call the check to yourself a salary or a draw or a dividend, whatever but don't pay personal bills through the LLC
So... In the case where he is paying himself a "salary" out of his LLC, he will have to pay income tax, right? What about Self Employment tax? These taxes are hefty, how does one become wealthy/financially independant if they are paying as much tax as everybody else?? This is What Kiyosaki calls 50% money??
Just picking one's brain...
[addsig]
I had to pay self employment taxes this year. And yes it was hefty. Needless to say, I am moving myself out of that situation.
ok so more to the point. Is there a limit on how much in "draws" I can pull from my company each year...or does it just have to look reasonable?? again whats to stop me from say making 50k a yr in my LLC and pulling 40k out for lifes bills??? I could effectively keep the LLC money small and limit my liability if I were to be www.sued.thx
I agree with every one else, stop paying those personal bills using your LLC. If the bills were in the LLC's name then fine, otherwise pay yourself a salary!
On the tax issue, you can set up your LLC to taxed in different ways...sole, corporation, partnership etc. Set it up to be taxed as a partnership for best tax advantages. Even if you are the sole owner, you can still have a partnership (of two or more people). You can be a 99% partner and the other partner can be 1% (or whatever). Other partners can be your spouse, parents, attorney, trusted friend, or another entity that you own such as a corporation, partnership, trust or another LLC. But in the end talk with a knowledgable CPA or Attorney!
For more info on LLC partnerships:
reinfo com/articles/goldminearticles htm
Just put dots where the spaces are above.
The essence of your question about keeping the LLC is "yes" you can keep drawing almost all of the money out of the LLC every year. In that case the LLC is referred to as a "shell" company because it is like a shell, pretty much empty.
There are risks, however. The odds of a court penetrating the corporate veil on a shell company seem to be slightly higher. If the court gets convinced that the only reason for this shell is to protect you from your own malfeasance they are very likely to rule you personally liable.
But as long as you are going down this road you should consider doing each building inside a separate shell. This way liabilities arising out of one building don't spill over to another.
someone mentioned the best way to avoid taxes is to do it as a partnership thru the LLC. I thought the main advantage of an LLc was that you didnt have to file seperate tax returns and could be taxed as an individual.......
is there a difference if you pay yourself a salary in taxes?? I didnt pay myself an official salary last year but still payed self emploment taxes. Thanks.
gmackk,
thx for the link...it confirmed what my accountant & I spoke about just the other day!
It looks to me as though you're looking for the "one-minute" corp. education...and really, no such thing exists.
There are lots of good books on how to form, operate one's own corp or LLC, which one to use, how to wisetly use, etc., and you'll do yourself a huge favor if you'll do some research and do some reading on the subject.