How to start Your LLC

You may have heard that starting a business is expensive.  This is not really true, you can do it in an hour or so.  It can be expensive, if you are  in a partnership–then you’ll need a lawyer to draw up a contract, but if you are on your own, you don’t need to pursue this avenue.      I don’t think anyone really need legalzoom either, from what I have heard most people are not really satisfied with their service–they are really distant and can not give you any advice b/c of their legal liability. 

I live in Indiana, it costs 90$ from the secretary of State’s office, and $30 bi-yearly. If you live in chicago or california or new york it can be more expensive, but you still don’t have to pay a high fee, just to get limited liability and form a business entity for tax purposes.

Once you get a certificate from the Secretary of State, you can get an EIN, employer identification number, to get an IRS tax shelter, any income you have coming that would be taxed can be written off against any business expenses you incur.  I had my banker get my EIN while I was in his office, we just went to IRS.gov and applied for it in his office–this took about 10 minutes and I had one.  Then I was able to open a business bank account.  This is crucial for keeping business expenses and income separate from my personal account–I even got a business debit card.

You can get an LLC in Nevada, no state income tax, they do not disclose the officers of the company or members, and its costs 120$…that’s much less than California especially with their yearly fee [ $800 last time I checked].   So there are options out there. You can hire a lawyer to have it set up for you in a state where you do not live, and pay for them to be your representative and submit bi-yearly entity reports. 

LLC is also the most correct form of entity for an architecture firm, say if you are starting  your own practice.  The LLC is relatively new: 

Limited Liability Company: An LLC is a formal association which combines the advantage of a corporation’s limited liability and the flexibility and single taxation of a general partnership. An LLC has members rather than shareholders. A member enjoys protections from the liabilities and debts of the LLC. Although not required by law, an LLC should operate under an Operating Agreement which is like a Partnership Agreement. TAX: If the LLC qualifies under IRS guidelines, it may be taxed only once, like a partnership, at the employee or member level, while not having the same restrictions as an S-Corporation.
[source: Indiana Secreary of State Office: http://www.in.gov/sos/business/3788.htm ]

Corporation:

A legal entity which is created by filing Articles of Incorporation. The Corporation itself assumes all liabilities and debts of the Corporation. A corporation is owned by shareholders. A shareholder enjoys protection from the corporation’s debts and liabilities. TAX: Income is taxed twice: 1) at the corporate level; and 2) at the employee level when a wage is paid or at the shareholder level when distributed as a dividend.  After filing Articles of Incorporation, a Corporation may seek to obtain S Corporation status for federal income tax purposes. The income of an S Corporation is taxed only once: at the employee or shareholder level. To qualify, the corporation may not have more than 75 shareholders and must meet other certain Internal Revenue Service criteria. The corporation must submit IRS Form #2553 to the IRS. An S-Corporation is considered a corporation in all other respects and is subject to no additional or special filing requirements with the Secretary of State.

[source: Indiana Secreary of State Office: http://www.in.gov/sos/business/3788.htm ]