Llc Quick Question

Business By uniquecreations Updated 10 Jun 2010 , 6:48pm by crazyladybaker

uniquecreations Posted 9 Jun 2010 , 1:29pm
post #1 of 20

I am setting up my business should I set it up as an LLC and what is the advantage? I am working on this now can someone help me with this
Thanks in Advance!!!!!!

19 replies
tracycakes Posted 9 Jun 2010 , 2:34pm
post #2 of 20

Your personal assets and liability are protected if something happens.

uniquecreations Posted 9 Jun 2010 , 2:47pm
post #3 of 20
Quote:
Originally Posted by tracycakes

Your personal assets and liability are protected if something happens.



Thank You I also notice that a lot of people are not under LLC so do they just have insurance to cover anything hapeening?

bettinashoe Posted 9 Jun 2010 , 2:59pm
post #4 of 20

f you don't establish yourself as an LLC and you are sued, you could have exposure above and beyond your insurance policy limits. As an LLC your personal assets are protected should something catastrophic occur as a result of your negligence.

diane223 Posted 9 Jun 2010 , 3:09pm
post #5 of 20

The best thing to do is google it. I did a lot of research into what the best way to cover my personal assets was. I found that reading the different options helped me understand it way better than just someone telling me which way to go. I like to fully understand why I'm doing something and that really helped.

uniquecreations Posted 9 Jun 2010 , 3:19pm
post #6 of 20

Thank you all this has helped me tremdously!!!

bonniebakes Posted 9 Jun 2010 , 5:41pm
post #7 of 20

I hope it's OK to post his here....

the website legalzoom.com has lots of information about various legal things, including LLCs and other types of companies.

hollyml Posted 9 Jun 2010 , 7:43pm
post #8 of 20

Firstly, the answer to that question is legal advice, and you should not rely on anything of that nature told to you by someone who is not a lawyer, or other business and tax law expert. icon_smile.gif Secondly, the specifics vary, sometimes a great deal, from state to state, so you should not rely on anything of that nature told to you by any professional from a state other than the one in which you will do business.

That said, the previous answers are essentially correct, to my knowledge (as someone who is not a lawyer but has professional experience with these issues) in that forming a separate legal entity through which you run your business will provide some protection for your personal assets (such as your home) in the event of a claim against your business. Unlike a corporation, an LLC can be formed and maintained relatively easily and with its income and expenses reported as part of your personal tax return (if you are the sole owner, it won't have to file its own separate return, unless you specifically choose to handle it that way), and unlike a partnership, it can be formed by a single individual.

You will have to pay a filing fee with your state to form the LLC and usually an annual franchise tax or fee -- the amount depends on the state. There are assorted "paperwork" requirements. You can do all of this yourself by using your state's corporations or secretary of state website, or you can hire a lawyer or an incorporation service. Basically, the more you pay for this type of service, the more personalized advice you will get about what type of entity is most appropriate for your specific situation and the more customized your documents will be. An initial investment of a few hundred or a thousand dollars can be WELL worth it, as compared with trying to do it yourself if you are not at all familiar with corporate or tax law. icon_smile.gif

indydebi Posted 9 Jun 2010 , 8:17pm
post #9 of 20

holly is right ... best advice is to talk to an attorney.

Here's a super simplistic way of explaining it.....

You make a cake. Client comes to pick it up. Slips and falls, and sues you for her broken leg. You have a $100,000 liability policy so you think you're fine.

As a Sole Proprietor: She sues you for $200,000 so her attorney goes after not only your business assets, which includes the $100K policy, your cake equipment, your biz delivery van, but also goes after your home, your household cars, your kids college fund and any other assets you have. You may be put out of business, lose your home, lose your cars, lose all of your assets.

As an LLC: Se sues you for $200,000 so her attorney goes after your business assets, which includes the $100K policy, your cake equipment, your biz delivery van, but he can't cross the barrier from LLC into Personal Territory; he can't go after your home, your personal cars and your personal savings accounts. You may be put out of business, but you'll still have a home to live in and a car to drive, and your kids can still go to college.

Again ... this is an OVER simplified explanation, but that's how my attorney explained it to me so I could understand it.

bettinashoe Posted 9 Jun 2010 , 8:18pm
post #10 of 20

I don't usually get picky or take offense to posts but your response, while somewhat accurate, hollyml, was basically reiterating the same things we had previously posted and felt like an attack. The forum is for asking and answering questions and disclaimer is not necessary or warranted. May I suggest in future postings you not assume that the answers provided are from "non-professionals." I, for one, have a life outside of my bakery and have been a claims professional for over 25 years while my spouse is an attorney.

hollyml Posted 9 Jun 2010 , 8:24pm
post #11 of 20

Yeah, except that the attorney in Debi's example CAN and likely WILL go after personal assets too. He's just less likely to GET them. icon_smile.gif Especially if you've done a good job of maintaining the legalities and separate books and accounts of your LLC.

One thing to keep in mind is that anyone can sue anybody for any reason at any time. Doesn't mean they'll win. But it is always a risk. Buying insurance is one way to manage the risk. Forming a legal business entity is another way. Making sure you keep your shop clean and free of obvious slip-and-fall hazards is another! Any business owner has to decide just how much money and time and energy to spend on what kinds of risk management.

pattycakesnj Posted 9 Jun 2010 , 8:44pm
post #12 of 20

Indydebi is correct in her scenario and that is why you need both some type of incorporation AND insurance. Also, the other benefit to an LLC instead of another type of corporation is that you can file your year end business taxes right in your personal taxes, a schedule C. (and this is coming from a licensed NJ and NY attorney, me). However, every state is different so go to your state's web site, they should have most of your questions answered.

indydebi Posted 9 Jun 2010 , 8:48pm
post #13 of 20
Quote:
Originally Posted by hollyml

Yeah, except that the attorney in Debi's example CAN and likely WILL go after personal assets too. He's just less likely to GET them. icon_smile.gif


Excellent point and I'm glad you brought it up. I asked my attorney this question ("can't they sue me as a business AND as an individual?") and he said, "sure they can ... but I'll get the individual suit thrown out in a nano-second."

hollyml Posted 9 Jun 2010 , 9:06pm
post #14 of 20

I'm sorry, Bettina, I certainly didn't mean to attack anyone! But I think I gave some information that was just not a repeat of the above posts, and the OP has no way of knowing anyone's qualifications. I just meant to offer a caution about that, because I've seen this question asked in other contexts before where people really just don't understand everything that is involved...it really is best to get specific advice from your own consultants -- whether it's right or wrong, information you get on Internet discussion forums is usually worth pretty much what you paid for it. icon_smile.gif

costumeczar Posted 10 Jun 2010 , 11:46am
post #15 of 20

On a purely practical note, I'd file as an LLC from the get-go, because if you decide to change from a sole proprietor to an LLC down the road, you have to go through all the paperwork again. New FEIN, new business license, new sales tax number, new insurance forms, etc. It's just a pain in the butt that you can avoid if you do the LLC from the beginning.

matthewkyrankelly Posted 10 Jun 2010 , 12:14pm
post #16 of 20

Also, REALLY talk to an attorney. It is my understanding that you want to be meticulous about keeping things separate. If a lawyer finds you've been "acting" like a sole proprietor (dipping into funds, not paying salaries, personal vs. commercial vehicles etc.) they can disregard the LLC and go after you anyway.

The lawyer will tell you how to set it up. He and the accountant will tell you how to behave buisness-wise to maintain it.

crazyladybaker Posted 10 Jun 2010 , 12:18pm
post #17 of 20

This has me to wondering... we are in the process of setting up an LLC for our rental properties right now.
If I got more serious with my caking could I roll this all under one LLC or would this require a new LLC for cake business?

I know this is not "legal advice" but would love to hear thoughts. Yes, I will speak to the attorney about this in our next meeting icon_smile.gif Just thinking out loud and wanted to hear others thoughts.

uniquecreations Posted 10 Jun 2010 , 12:54pm
post #18 of 20

Thank you all for your information it has been a great help!!!! thumbs_up.gifthumbs_up.gif

indydebi Posted 10 Jun 2010 , 3:57pm
post #19 of 20

crazylady, my LLC was "Brim Mgmt, LLC". My companies that operated under this parent company were "dba Cater It Simple" and "dba Banna's Cookies". I used to own rental properties and always figured if I ever bought another one it would be "dba Brim Properties" under the same parent company. All of my paperwork, tax ID's, etc., were in the name of Brim Mgmt.

(When I worked for the casket mfg'r company, they were really big into creating a new company for every little thing, but they were all under the one big parent company.)

crazyladybaker Posted 10 Jun 2010 , 6:48pm
post #20 of 20
Quote:
Originally Posted by indydebi

crazylady, my LLC was "Brim Mgmt, LLC". My companies that operated under this parent company were "dba Cater It Simple" and "dba Banna's Cookies". I used to own rental properties and always figured if I ever bought another one it would be "dba Brim Properties" under the same parent company. All of my paperwork, tax ID's, etc., were in the name of Brim Mgmt.

(When I worked for the casket mfg'r company, they were really big into creating a new company for every little thing, but they were all under the one big parent company.)




Thanks for that tip Debi thumbs_up.gif

We should be working on this LLC project in the next couple of weeks. It really makes me nervous about the rental properties not being in an LLC.
The sooner we do it the better.

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