Basic Question: Is an LLC Necessary?

[read]

I'm sorry. I fall into the non-business-type category, so as I'm working on creating my muse, I'm a little baffled by some of the legal/business-type things. In the book, Tim mentions that he recommends getting an LLC. I'm guessing this helps prevent personal lawsuits?

I'm sorry. I feel like the kid in class raising her hand to ask a question that's far too obvious... But there it is.

[T.A.]

Is it necessary? No

Is it relatively cheap and easy to set up? Yes

Does it protect your ass? Moreso than noting.

[Drewkerr]

In my state I setup an LLC in two days. It took about 5 mins to fill out the paperwork, and then i payed the LLC fee of $75 and the rush fee of $100. I had the LLC formed the next day, After the LLC was setup I called the IRS and had a TIN in another 5mins.

With the LLC paperwork and the TIN I setup a business checking account.

The LLC would just cover you if you get sued or screw up and not pay bills so they can't come after your personal assests.

[hostelwiki]

I filled out the paperwork online (you could use a service like LegalZoom.com to do it all for you, but it's frankly easy enough to do yourself once you spend 15 minutes hunting around for the right website at your Dept. of State) and am expecting the process to be completed today (2 days after I filled out paperwork). I will then apply to convert my C-Corp to an S-Corp (should take a day or two) so that I am personally taxed for my corporation's earnings.

I am using a Corporate structure to protect my personal assets from any potential claims, just as Drewkerr states. I eschewed the LLC structure only b/c I may want to be able to sell shares to friends / investors and it's a bit easier to manage this with an C-Corp / S-Corp structure. In the end, you can go either way but it does seem to make sense to invest the ~$150-200 to ensure you are protected.

[read]

Thanks for your immediate responses! It sounds like an LLC is the way to go -- and well worth the effort.

Drew, you mentioned that you got a TIN as well. That's a Taxpayer Identification Number (yes?). With an LLC, then, will I not use my social security number?

I'm so sorry. Again, I'm such a newbie at all of this, but I want to make sure that I set things up right, to prevent problems later on--

[Drewkerr]

Well if you are going to grow your business and every want a business loan or a business credit card (and not have to give your own SSI for everything) then you need a TIN. You can build business credit through Dunn & Bradstreet. In my mortgage business anytime I applied ofr anything or wanted to open an account Like a phone & interenet line for my office they either wanted my SSI or the business TIN. THe benefit to not using your SSI is that if you are every late on bills of default on anything through the business this will help from ruining your personal credit. Then you have LLC or Corp. to protect your personal assest.

Just starting out this isn't neccessary. But in my case I have 14 employees, a 3,000 sq ft office, leased copy machines, light bill, phone & internet bill, credit reporting access account and I didn't want to have any of that tied to my personal SSI.

Drew

-Drew

[read]

Thanks, Drew! That helps a lot. It sounds like I'll start out with the LLC (and a business license for my city) and, if I need to open a credit card or anything else, I'll get the TIN then. Thanks for all the info!

[Talon]

From my view an LLC does not help as much
Taxation and law suits aside-taxation at times you could be taxed twice-at the company and at the individual level answer find a good tax accountant when setting up an LLC.
Penetration of the veil means if you are hiding legal assets that came from the company you will lose that protection during a law suit at a judges discretion. Join the masons or something that helps you versus paying money that could be lost without a good lawyer.
Anyone know a good lawyer?
Another suggestion anyone have an insurance company that handles cheap liability insurance?

[Talon]

From my view an LLC does not help as much
Taxation and law suits aside-taxation at times you could be taxed twice-at the company and at the individual level answer find a good tax accountant when setting up an LLC.
Penetrate of the veil means if you are hiding legal assets that came from the company you will lose that protection during a law suit at a judges discretion. Join the masons or something that helps you versus paying money that could be lost without a good lawyer.
Anyone know a good lawyer?
Another suggestion anyone have an insurance company that handles cheap liability insurance?:cool:

[ardor]

I plan on getting a VA
Finding Muse
Ebay Test
Adwords/Website Test
Getting X orders for X profit

Idea this Profit is enough to order your muse, pay for adwords, pay for your LLC, and pay for your VA.

Once i see my muse will be successful, I am going to get the LLC.

[amuse-ing]

Another positive about having an LLC is that some drop shippers will only do business with you if you have a resellers license which you can only get with a business registration. An LLC is not necessary in the beginning, but it could be in the end. Plus it's cool to say you own your own business! :D

[davinic]

A TIN takes less than 5 minutes online, for free, from the IRS website. There's no reason not to have a TIN.

Depending on the state, an LLC takes (usually) 5 minutes online and about $100. Just go to the Secretary of State's page on the state website. It gives your business credibility and liability and tax advantages (your LLC can be treated taxably as a sole proprietor, partnership, or S-Corp).

Then you will need an LLC operating agreement to open your bank account (so the bank knows who should have legal access). Go to http://www.operating-agreement.theeasyforms.com/ and get the appropriate agreement for $10.

I'm not sure why you wouldn't do it. An LLC is not set up for a single muse - anything you do as a business goes under that umbrella.

To me this is an example of misplaced priority. Quit agonizing over something that takes 10 minutes and costs $100. Do it NOW.