What can an LLC do and not do?

I see allot of people here saying to form an LLC. As i started looking into it nearly every website i go too just have gobbledygook of information on this stuff to the point of overkill. Can someone list the cliffs notes versions of the benefits and what i can and can not do with an LLC.

Example,, can i get a credit card for the business, or a car ect?

indeed its realy frusturating
here is an article you may find direct to the point
http://mashable.com/2012/02/17/small-business-incporporation/

Thanks for the post that is alot of stuff that i had pretty much already read. It unfortunately did not answer my other questions.

for your question to get a credit card you need a bank account
its pretty easy if you are in the US but its near impossible to do it online
after 9/11 banks require your presence to open the account

I would like to here more on forming a LLC also.

aceprogrammer said:

for your question to get a credit card you need a bank account
its pretty easy if you are in the US but its near impossible to do it online
after 9/11 banks require your presence to open the account

Click to expand...

Yes i am in the US, first thing i had planned on doing was get a Bank account with the LLC name

there is also the matter of double taxation if your llc is not incorporated in your state of residence that something that you should look into.

LLC Cliff Notes:

• An LLC is a state law entity. The IRS doesn't recognize LLCs at all. If the LLC has a single owner, then the profits and losses will pass through to your personal income. If the LLC has multiple owners it will be filed as a partnership. You also have the option of filing your LLC taxes as an S-Corp, but must supply a form to the IRS to make that election.
• The rules are different for every state. Since an LLC is a state entity, each state treats them a little differently. Seek out a CPA and/or lawyer with experience in business formations for specific details regarding your state.
• You do not need an LLC to get a business bank account or credit card. To get these things you need to register a business with your state. This can be an LLC but it does not have to be. Then get an EIN from the IRS. The EIN is essentially your business's SSN. When you open a bank account/PayPal account, get a credit card, etc. the EIN is what you need.
• An LLC is not bullet-proof protection from liability. One of the main benefits of an LLC is that it protects your personal assets from business-related debts and other liabilities. However, if you want this to hold up in court you need to treat your LLC seriously. Don't mix funds, keep separate records, and otherwise act like a real business. If you don't the court will declare you and your LLC one and the same entity and you're back on the hook for those business liabilities.
• An LLC can have multiple members. Unlike S-Corps, each member can have an ownership (i.e. voting) stake separate from their profit share. You can create new members at any time according to the rules you created in your LLC operating agreement. This lets you change owners or sell equity pretty easily.

To answer the original question as to what an LLC can or can't do, the thing to remember is that LLCs (and corps and trusts and...) are artificial persons in legal terms.

So can a person get a credit card? Of course, but if that person is 2 days old, the lender might want someone a bit older and more responsible to cosign the line of credit.

I have enough offline experience with LLCs and S-corps to choke a horse. Each has its own uses and benefits. Lawyers and accountants have totally different approaches to setting up business entities. A lawyer is all about hiding and protection...while an accountant is all about financial benefits and tax advantages. The people who taught me about business entities always told me to go with tax advantages over asset protection mainly because it only takes time and money to dig through the entities if you are being sued..you will lose if the person suing you has enough money to go after you. For this reason, I would suggest NOT asking a lawyer about setting up an LLC or an S-corp. Instead, go to an accountant who has his own investments that are spread out into stocks/real estate/and his own accounting firm.

Cars and credit cards are relatively simple to obtain in the business name...if you have good credit because you will be signing for them. When you first start out, your personal credit and your name will be what you use for the company's credit.

S-corps can allow for health insurance to be reimbursed to the employee. Corporate income does not roll up to your schedule C (fyi..schedule C is one of the most audited forms from the IRS).

My accountant is really good and he charges $180/hour. He is expensive, but he is REALLY good...he makes much more for me than what he costs. your accountant should be the same!

If you have other questions, just ask.

Several differences exist between a company (also called a Limited Liability Company, or LLC) and a corporation. Among these include differences in taxation, financial liability, ownership and how they are managed.

Taxation

• Corporations and LLCs have separate rules regarding taxes. Profits of a corporation remain exempt from Social Security and Medicare taxes. Those of an LLC are subject to a 15.3 percent self-employment rate. However, an LLC does have some tax advantages: Owners of a company can deduct company losses against their personal income, and can also choose to be taxed as a corporation if desired. Corporations cannot choose to be taxed as a company.

Financial Liability

• Financial liability in profit and loss reflects solely upon the owners of a company. A corporation's profit and loss goes directly back to the corporation as its own entity. Neither the owners nor stockholders are liable.

Ownership

• A sole proprietor or a group of individuals owns an LLC. Stockholders, whose level of ownership corresponds with the percentage of shares purchased, own a corporation.

Managerial Differences

• The board of directors, elected by the stockholders, is responsible for the management of a corporation. The sole proprietor or group of owners handles the management of an LLC.

Hope this helps, feel free to contact me with any other questions

Msidennis, you are assuming that the LLC will be treated as a partnership. An LLC can file a 2553 with the IRS and be treated as an S-corp for tax purposes. It can also file an 8832 and be treated as a C-corp.

But we are getting pretty far afield.

Thanks everyone, this something I may have to look into shortly!

msidennis said:

Several differences exist between a company (also called a Limited Liability Company, or LLC) and a corporation. Among these include differences in taxation, financial liability, ownership and how they are managed.

Taxation

• Corporations and LLCs have separate rules regarding taxes. Profits of a corporation remain exempt from Social Security and Medicare taxes. Those of an LLC are subject to a 15.3 percent self-employment rate. However, an LLC does have some tax advantages: Owners of a company can deduct company losses against their personal income, and can also choose to be taxed as a corporation if desired. Corporations cannot choose to be taxed as a company.

Click to expand...

A little more detail on this, specifically regarding LLCs.

As msidennis said, profits from an LLC are typically subject to self-employment taxes because they pass through to your personal income. You can avoid this to some extent, however.

Only earned income is subject to the self-employment tax. Dividends are not earned income. In an S-Corp (or an LLC filing as an S-Corp) you can pay yourself a "reasonable" salary for the work you do and collect the rest as a dividend, reducing your overall self-employment tax. There is no IRS guidance as to what constitutes "reasonable", but your CPA can help you figure this out. Pay yourself what a corporation would pay for an employee doing your job and you should be OK.

You do not necessarily need to file as an S-Corp to do this. My CPA, for example, files multiple LLC partnership returns for me and does this for all of them. Be aware, though, that the IRS guidance only discusses S-Corps, so you may be taking a marginally higher risk by not electing to file as an S-Corp.