Deciding what to do after forming an LLC can be overwhelming and confusing if you’re not sure where to look for the correct information. Taking the right steps to start your business journey is crucial to ensure your businesses success.
One of the major benefits to owning an LLC are the flexible tax requirements. While an LLC (limited liability company) is a type of business entity, an S corp status is a tax classification option for LLC business owners. Businesses taxed as S corps have pass-through taxation, but an LLC already has this by default. So why would an LLC want to be taxed as an S corporation?
The members of a standard LLC are considered self-employed. They’re compensated by receiving their share of profits from the LLC, but they can’t be employed by the LLC. Being self-employed means paying self-employment taxes (about 15.3%) on all profits they receive from the LLC. This is more than the taxes they’d pay when working for someone else because their employer would pay part of them.
When the members elect S corp status, though, they can be compensated in two ways, by receiving their share of the profits and by being paid as an employee. Once they do that, they only pay self-employment taxes on their salary and not the profits they receive. (Of course, this is only for self-employment taxes; LLC members still must pay income and other applicable taxes on their profits.) This can add up to quite a lot for certain profitable LLCs.
One caveat to this is that the IRS expects you to pay yourself a “reasonable salary” as an employee of the LLC. Otherwise, you could pay yourself an annual salary of $1 and avoid contributing anything to Social Security and Medicare. The IRS considers “reasonable” to be something similar to what others in your field are earning.
Learn more about S corporations.
Getting an LLC helps establish your business credibility and provides personal liability protection. To legally operate your business, you may need to acquire LLC business licenses such as federal, state, and/or local business licenses.
Depending on factors like your industry, professional services you offer, and location, you may require other federal, state, and/or local business licenses and permits to operate. These could include things like building permits, health permits, signage permits, and other additional permits and licensing requirements. There’s no central place to check to see every license or permit you might need, so you’ll have to do some research.
If you don’t have the time or inclination to do all this research, or if you just want the peace of mind to know that you have all the business licenses and permits you’re legally required to have, our business license report service can do the work for you.
If you applied for an Employer Identification Number (EIN) with the IRS, you’ll be able to open a business bank account. Having separate accounts for your business activities and your personal banking is critical for sorting out your finances at tax time. It also helps you avoid commingling funds.
Commingling funds makes your taxes more difficult, and it could also be used against you if someone takes you to court to challenge whether you and your LLC are truly separate entities (that is, they want to go after your personal assets, not just the company’s).
We offer a discounted bank account for your new business. This allows for unlimited transactions, online banking, a debit card, and more.
When you open a business bank account, you may also want to get a business credit card. Not only is this convenient for small purchases for the business, but it establishes a credit history for your business, which could be helpful if the LLC ever seeks out a business loan.
If you don’t have a lot of startup capital for your LLC, seek out ways to fund your business. This include using your personal savings, venture capital, government grants, money from family and friends, and/or an SBA loan or other business loans from a bank.
Using an accountant or bookkeeper to manage day-to-day business operations and handle business taxes will help ensure that you’re staying lawfully compliant and not falling behind on annual reports and registration requirements.
In addition to filing taxes, an accountant/ bookkeeper can follow the operating agreement guidelines to ensure the business payroll is handled effectively. Having a professional handle the financial side of your business will help ensure legal compliance and free up time to manage the rest of your operations throughout the entirety of your business life cycle.
The ZenBusiness Money app keeps your finances organized throughout the year so you’re ready for tax time and don’t miss out on deductions.
Getting business insurance can be costly, but will help ensure the long-term success of your business goals even if you run into legal troubles. General liability insurance can provide protection for your business from a variety of legal dangersand is essential for all business owners to have.
In addition to general liability insurance, other types of insurance such as worker’s compensation, commercial property/auto, and professional liability insurance can all be acquired to protect different aspects of your business. Some, like workers’ compensation, are a legal requirement in nearly all states.
In order to have your business recognized and establish a memorable brand, it’s important to create a logo that consumers can remember you by. A logo creates a brand identity for your business and gives customers something to remember you by.
Using a website builder to put your business online is crucial in this digital world era. Having your business online raises your brand awareness, brings you more customers, and acts as an extension of your branding by creating an online presence for your business.
Your website can include essential contact information such as a phone number or business email that customer can contact you if they need help or have questions about your products or services.
In addition to helping you start an LLC, we also offer many other services to help you on your business journey. Our team of experts can help you establish an LLC starting at $0 today.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
ZenBusiness is a financial technology company and is not a bank. Banking services provided by Thread Bank; Member FDIC. The ZenBusiness Visa® Debit Card is issued by Thread Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted. Your funds are FDIC insured up to $250,000 through Thread Bank; Member FDIC.
The first step to reaching your goals is establishing a business plan to effectively strategize the best way to make money for your business. Every single business is different, and so are the ways they make money. In addition to business operations, other ways to make money include funding capital through loans, investors, government financing, and family/friend donations or loans in order to get your business operations up and running to start earning more capital.
Establishing your business as a legal entity by forming an LLC can sometimes offer business owners a variety of tax benefits and write-offs. LLC write-offs can include office space deductions, production costs, equipment, and other large purchases. Learn more about LLC tax write-offs.
You can use your business’s EIN to open business bank accounts, hire employees, apply for business permits and licenses, apply for business loans and credit cards, and so much more.
Although there are many benefits to having an LLC, the most recognizable perk is tax flexibility. A single-member LLC can choose to be taxed as a sole proprietorship or corporation, whereas a multi-member LLC can be taxed as a partnership or corporation. Different tax structures offer a variety of benefits and deductions. Depending on your business activities, any of these statuses could be beneficial for different tax purposes.
Start an LLC in Your State
When it comes to compliance, costs, and other factors, these are popular states for forming an LLC.
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