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Registering an LLC. Just a few questions first.

Discussion in 'Business & Tax Advice' started by Markthedude, Dec 28, 2011.

  1. Markthedude

    Markthedude Power Member

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    I'm excited to say that I have taken my I.M career full time and will be registering an LLC at the beginning of Jan. to help make my life easier with my ventures.

    I will be using this thread here to register: http://www.blackhatworld.com/blackh...dvice/317443-cheapest-way-start-your-llc.html

    But I'm not an accountant, took 2 years of it in school so I know the lingo but am not an expert.

    Here is what I want to do and would like your advice on the subject.

    I live in the US, (MN) and want to register with Delaware after reading some articles, mainly the fees are cheaper then my home state.

    My Business: Affiliate marketer, so I don't have employees, I don't freelance and I don't have a physical address (i.e office). I simply collect commissions from sales that my sites generate.

    Questions:

    If I register my LLC in another state will I still have to pay my local state taxes too?

    Is it really worth registering the LLC out of state as far as tax breaks/cuts go or is it better to keep everything streamlined by keeping everything local?

    Once the LLC is registered:

    I will be taking money from my personal bank account and putting it into my business account to meet the minimum balance my bank demands to keep the account open.

    Should I wait until I make the minimum amount of money under my LLC tax ID number then transfer it to the business account? I just don't know if it will create a problem by using my "personal" money in the business account when it comes to tax time. Maybe I'm over thinking this though.

    Thanks for taking the time to help me out. I'm not against talking with an accountant or anything, but it just seems that this is a simple process once I have these answers.
     
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  2. teeniegenie

    teeniegenie Supreme Member

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    Congrats on your business success!

    A few questions for you:

    1. Why do you think you need a LLC?
    2. Do you have significant assets you are looking to protect?
    3. If the answer to #2 is "yes" - do you have any potential legal problems or other outstanding liability issues at the present time (such as a foreclosure, short sale, criminal or civil lawsuit, etc.)?
    4. You don't have to answer this question out in the open, but it would be helpful to know how much you are currently making.
    5. Will you be the only owner or will there be other owners (i.e., a girlfriend/wife/partner, etc.)

    Now to answer your questions:

    1.
    In almost all likelihood - yes. Having a Delaware LLC/Corp won't save you from paying MN personal income taxes when you take a distribution from the LLC because you are a MN resident. There may be some weird MN law excluding you, I wouldn't hold my breath on that one.

    2.
    In my opinion - NO. Just get a MN LLC

    3.
    When you create your LLC you will need to make a cash contribution to it for the company's initial funding. There isn't a problem with this initial cash contribution. It doesn't "taint" the LLC's benefits. What does taint it is commingling of business and personal assets (i.e. - paying your mortgage from a LLC bank account when you own the home, paying business expenses from your personal account and vice versa, etc...). Just pick a date (Jan 1 is a good time to start), open a bank account and fund it with personal funds. Then, make the LLC "self sufficient" with the revenues you'll earn from your IM activities.

    If you run short of cash, you can always make another capital contribution down the road. Just try not to make it a weekly/monthly habit or else it screams of not having a legit business.


    Before spending the time/effort on all of this, I'd look at the reasons why you think you need a LLC at all. You need to be making a certain level of $$$ before there are any potential cash savings. Even then, if you don't set things up correctly on the tax-side of things, you'll never realize those tax savings. Additionally, if you don't maintain the LLC properly you won't realize any asset protection benefits either.

    If you are really going to take your new career seriously, spend $1,000 to $2,000 and set things up right with a CPA and attorney.

    Just my $0.02.

    Good luck!

     
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  3. Nookie Monster

    Nookie Monster Senior Member

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    Register it in your state. I set up one in mine and was cheap and easy. With one registered in another state you need to also register as a foreign corporation.

    When you set up an LLC you state who and how much is going to monitize the venture. These individuals are called members of the LLC. Granted an LLC can be set up to be taxed as a corporation, but a standard LLC is like a partnership in that all profit is pass through to the members and taxed at their level.

    Please remember to keep good records of company expenditures to offset the profits during tax time.

    At this time of year it's a good idea to upgrade your assets (computer equip) for a 179 deduction and give your older equipment to Goodwill for a charitable deduction. :)

    P.S. I really think TeenGenie nailed it better than I did. Same basic idea just better wording...
     
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    Last edited: Dec 28, 2011
  4. Markthedude

    Markthedude Power Member

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    Thanks for the reply, I really appreciate the help!

    1. I was told that it's cheaper to pay taxes on an LLC rather than claiming self-employment. That's the main reason for registering, and I would like to have a business EIN to use with affiliate programs rather than my SSN for security reason.

    2. Not really, my computer would be about it honestly for high ticket items. I don't really see how anyone would be able to sue me for my activities either unless someone would claim copyright infringement on a domain. All my business activity is legitimate and I don't do any service based business's or sell my own products so there is nothing they could really take other then my money I guess.

    3. Nope.

    4. I'll PM you a rough number.

    5. I will be the only owner, single at the moment and no business partners.

    I've been spending most of Dec. tracing where every penny went, what a pain but I now have a system in place and is why I want to get everything setup for Jan. for easy bookkeeping.

    Since I have only been making an income the last 6 months I'm actually only cash flowing a little for this year because of all my purchases at the begging of the year. But most of those purchases were one time fees so this next year will be nice.

    I'm actually going to be purchasing a new computer in Jan. as I will be cash flowing significantly more and so it will be smarter tax wise to use it against next years income.

    Thanks for the tip on the deduction and write off!

    Thanks for all the input again guys, really appreciate it!
     
    Last edited: Dec 29, 2011