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Are you down with the LLC? Yeah, you know me…
Obviously, you don’t know or you wouldn’t be wasting your time reading this. So, let’s just get straight to the point.
So, FYI (for your information) to CYA (cover your assets), under no circumstances, in any city, state, county, or anywhere else in this country, do you need a limited liability company (LLC) to start a business.
So, if you’re feeling a little bit of peer pressure, because you see all the cool kids doing it, it’s not a requirement.
Yes, there are good points for starting an LLC business. However, that’s for you and only you to decide.
If you’re unsure about whether or not to form an LLC, here are some things to consider.
First, the decision to become a sole proprietor or register as an LLC is a personal preference. However, if you expect that you will become a large company in the future, then you might want to register as an LLC.
Second, if you’re planning on hiring employees during the course of your startup, an LLC offers legal protection and benefits that aren’t available in a sole proprietorship. It’s also easier to hire employees when you have legal protection and benefits provided by a LLC.
Third, acting as a sole proprietor allows you to run your business without filing a lot of paperwork.
Finally, if your business is sued, then forming an LLC can help your personal assets from any creditors.
For example, a sole proprietor business used its property as collateral for a loan. If this sole proprietor business doesn’t pay back the loan or investment, then the creditors can possibly go after the sole proprietor.
So, the creditor can take away the sole proprietor’s business’s property and any personal property, e.g., car, house, wages, financial accounts, etc.
So, registering as an LLC may be worth to you so that your personal property is protected ( if you’re sued).
No, you can choose one or the other. An LLC is a separate legal entity from the owner. However, a sole proprietor is not separate from the owner, because they are the business.
A couple of advantages of a sole proprietorship is that they don’t have to register their business (if they don’t want to) or worry about filing any paperwork or annual filing fees.
Regardless, you should understand how each type of business benefits you. For example, there may be better tax advantages or disadvantages to registering your business.
For an LLC, you would pay taxes on a pass-through basis. So, the LLC doesn’t pay taxes, but the owners does pay taxes. This avoids the double taxation that C Corporations deal with.
Once you figure out the pros and cons, you can determine which type of business is right for you.
Yes, it’s possible depending on your state’s rules. A business license is a separate piece of paper that allows a business to operate legally in that state.
So, if your type of business doesn’t require a business license, you’ll only need to register your LLC.
Do you need an LLC to open an LLC bank account?
It’s not required to form an LLC to open an LLC bank account.
In fact, you can open up a bank account whether you’re a sole proprietor or an LLC. You’ll just need an employee identification number (EIN) for both types of businesses.
Don’t get suckered into paying for an EIN. You can apply online with the IRS. This service is 100% free.
If you’re not using your real name to start your sole proprietorship business, then you’ll also need a DBA. For an LLC, you’ll need to register your business with your state’s Secretary of State.
Wrapping It Up
So, now you know. It’s not required to have an LLC to start a business. It may be a wise thing to do. However, it’s not a requirement.
Choosing a business entity is a personal preference. You can make a list of what’s important to you. For example, you may care about the asset protection of an LLC or that a sole proprietor can get started without any paperwork.
Regardless, you should choose the type of business that checks off most of the boxes.
Keep in mind that you also should consider Uncle Sam’s cut. Taxes are a big part of your business’s income and/or expenses.
You don’t want to wait until you get that huge tax bill in the mail before changing religions—or business entities. (Wesley Snipes’ Reference: Welsey Snipes claims the IRS had no right to tax him…he was sentenced to 3 years in prison in 2008.)
Will you be using an LLC or will you just set up shop without it?