Understanding the LLC?

Now, this is the second in a brief series I’m sharing to discuss the basic entity structure options business owners have. Given the shift to a “gig” based economy, many new business owners always seem to find themselves in tax trouble when they drive for Uber, or Door Dash, or even take on contract work. 

Enter the simple, basic LLC, or Limited Liability Corporation. 

It’s the go-to for new small businesses, and the costs for setting it up are almost always under $1,000, so the protections of a corporation (as well as the tax advantages) are within the grasp of anyone who is earning money. 

Depending on where you are geographically, though, yo0u might have more options than you can imagine. 

Single-Member LLC/Sole Proprietorship

General Partnership

Family Limited Partnerships

Series LLC

Restricted LLCs

 L3C Company

Anonymous LLC

Member-Managed LLC or Manager-Managed LLC

Now, some of these are specific to certain states. New Mexico, for example, currently has the only Anonymous LLC, but the key is that all these types do basically the same thing. They are all easily researched, and bear in mind, some will not be an option for you with your specific situation. 

Here’s the key takeaway, though: when you have your small business structured as an LLC, you have the “pass through” taxation, most sole proprietorships are used to coupled with the corporate protections you need. 

One thing that many business owners fail to consider is the fact that new business divisions – or even products – can be broken off into their own LLC to truly test and vet them. 

It might be more work, but if a new product or service is not aligned with your “usual” business, then separating it as an entity is an ingenious idea, especially if you think the new venture is one that might be sold or developed along a different route than your primary business. Sure, this can create a little more work for bookkeeping and tax preparation, but it can also give you valuable metrics and data about how your new entity is developing – and its actual profitability.

The beauty of having multiple LLCs in lieu of one “big” one is the obvious one – they represent separate business ventures you’re involved in and, should one be sued or in financial dire straits, it can be dealt with directly and “protect” the other entities.  Structured properly, even the simplest LLCs corporate veil can be protected, and that means protection for you as well as your other businesses.

None of this is to say that a single LLC is a terrible thing, but as your business dealings get more complex (and successful!), it’s an excellent idea to have multiple LLCs set up. The cost is negligible, the protection is protracted, and my team and I are pleased to advise you on – and assist you – in setting them up and making sure your taxes are easy to handle and understand. 

As always, feel free to reach out and schedule a call to learn how to get the LLC protection that makes sense for your business.

IMPORTANT: Our firm specializes in tax resolution. We serve clients virtually so don't hesitate to reach out.  If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm, so we can schedule a confidential consultation to explain options to permanently resolve your tax problem Make an appointment here!  Or, call Toll-free 1-855-254-1892.