Welcome to the Small Business Ideas Forum! We are a community of over 100,000 small business folks with over 163,000 posts for you to browse. We pride ourselves on being the friendliest forum you will find and we'd love to have you as a member of our community. Please take a moment and register for a free account. If you need any help, please contact Chris Logan.

Small Business Ideas Forum

Small Business Ideas Forum

A friendly place to share small business ideas and knowledge, ask questions, find help and encourage others that are involved in the small business industry. Topics include small business marketing, generating revenue and small business computing.

Go Back   Small Business Ideas Forum > Generating Revenue, Insurance, Taxes, Etc. > Small Business Finance
Register Search Today's Posts Mark Forums Read

Reply
 
Thread Tools
Old 14th August 2012, 05:07 PM   #1
cyclontzy
Member
 

Join Date: Aug 2012
Posts: 2
Default Some Question About Starting An LLC

So basically, I've been refurbishing and selling computers and other electronics. But, it's just been a side venture, but I see it's very profitable and the business is most definitely there. I've been selling at a local swap meet 2-3 days a week, and Ebay. I just had a couple of questions.

Legalzoom or do it yourself with a lawyer?
My plan was setting up the LLC then loaning it X amount of my money. But, currently I have X amount of product, can I sell it to the LLC?

thanks

cyclontzy is offline   Reply With Quote
Register or log in to remove this ad.
Old 16th August 2012, 07:56 AM   #2
ArcSine
Member
 

Join Date: May 2009
Location: Charlotte, NC
Posts: 45
Default

If it's to be a one-owner LLC (you), that'll simplify many of your issues considerably. An attorney's guidance is golden when drafting an LLC Operating Agreement for a multi-owner entity, because a large portion of the agreement deals with things like how profits, losses, cash flow, gains from asset sales, and so on, are to be allocated among the partners, as well as addressing questions regarding buy-sell provisions between the partners, how to value the biz upon the departure of a partner, etc. With a simple one-owner LLC, the need for an attorney might be reduced considerably, or even unnecessary, depending on the circumstances.

Start by visiting the website of the Secretary of State for your particular state. LLCs are administered by each state's SOS, and on the website you'll find guidance for LLC owners, and the necessary forms and instructions for creating an LLC in your state. After looking over these materials you might feel comfortable with a do-it-yourself approach. Should you choose a DIY approach, Google "LLC operating agreement" and you'll hit on many examples of actual or suggested OAs. Peruse a few to get a feel for the typical contents, and you could probably then come up with something similar which you'd tailor to your situation.

With respect to the product you currently own, it'd be simpler to contribute it to the LLC in exchange for equity, rather than selling it to the entity. Same end result with fewer bookkeeping entries and tax ramifications. Just put the inventory onto the LLC's books at whatever cost you paid for it (assuming it hasn't depreciated considerably since you bought it), and record that transaction as a contribution for capital.

Be aware that a one-owner LLC is treated for income tax purposes as a so-called "disregarded entity". This has nothing to do with the existence or nonexistence of the LLC (it's a valid, legally-existing entity for all purposes), it simply means that you don't have to file a separate tax return for the LLC. You'll just report the LLC's revenues and expenses on your own personal return, on a Schedule C, just as if you were operating the business as a sole proprietor. An accountant or tax pro can give you more details, as well as other need-to-know info re LLCs and taxes.

There's no harm in getting all the way around past third base on your own, regarding the entity's formation, setup, documents, etc., then getting an attorney's and/or accountant's advice to help you cross the plate, if you feel a bit uneasy as you round third.

Cheers!

__________________
...it was early and I was full of no coffee...
ArcSine is offline   Reply With Quote
Old 16th August 2012, 08:48 PM   #3
CrossCountry2
Member
 

Join Date: Jul 2012
Posts: 22
Default

With regards to selling your current inventory to the LLC, since you will file taxes of the LLC as your own, I suggest you don;t go through the selling of ht inventory.

If this is part of your business plan, the you should incorporate. But you will have to report the capital gain in anything you sell to the corporation.

To set up your LLC, you can do it yourself, but like ArcSine indicates, lawyers advice is golden, even if costs gold...

__________________
Net Branch
Mortgage Net Branch
CrossCountry2 is offline   Reply With Quote
Old 16th August 2012, 09:30 PM   #4
cyclontzy
Member
 

Join Date: Aug 2012
Posts: 2
Default

Right that's what I was thinking, just to avoid any compromising situations.

Thanks so much for the great tips and information. I really appreciate it.

I just had one more question, Let's say I loan the business 5 K, and then right up a promissory stating once any profits are made the loan will be repaid. Do I start reporting quarterly income once that loan is repaid, or do I report the profit even before the loan is repaid?

Thanks again.

cyclontzy is offline   Reply With Quote
Old 18th August 2012, 06:46 AM   #5
ArcSine
Member
 

Join Date: May 2009
Location: Charlotte, NC
Posts: 45
Default

If you particularly wanted to structure your cash advance to the LLC as an interest-bearing loan, that's certainly OK, but you could simplify matters a bit by treating the advance as a capital contribution to the company. Thus it shows up on your LLC's balance sheet as equity rather than debt.

Down the road you could extract that cash back out, as cash flow permitted, in the form of draws. You'd avoid the drafting of the formal IOU, the interest computations, etc. It's the simpler, and hence more oft-utilized, procedure for LLC owners moving cash into and back out of the company as needed.

But if you prefer to set it up as an interest-bearing loan, the interest will generally just wash, for tax purposes. As the lender, you'd have interest income to report on your personal return. As the borrower/payer, the LLC will have interest expense to deduct, in the same amount. Since the LLC's numbers get reported on your personal return (in a one-owner situation, as I mentioned previously), those two amounts would simply cancel out, in terms of the effect on the tax return's bottom line.

While that's the simple overview, if you choose to go the promissory note route you should get the input from a tax advisor or return preparer when the time comes. The overview is one thing, but the specific mechanics and details of exactly how and where the numbers are to be reported on the return are determined by specific rules which I haven't visited in some time.

__________________
...it was early and I was full of no coffee...
ArcSine is offline   Reply With Quote
Old 22nd August 2012, 01:46 AM   #6
Michael321
Member
 

Join Date: Aug 2012
Posts: 40
Default

Quote:
Originally Posted by CrossCountry2 View Post
With regards to selling your current inventory to the LLC, since you will file taxes of the LLC as your own, I suggest you don;t go through the selling of ht inventory.

If this is part of your business plan, the you should incorporate. But you will have to report the capital gain in anything you sell to the corporation.

To set up your LLC, you can do it yourself, but like ArcSine indicates, lawyers advice is golden, even if costs gold...
Totally agree with CrossCountry. Have some lawyers advice!

Michael321 is offline   Reply With Quote
Old 18th September 2012, 04:56 PM   #7
aim4u
Senior Member
 
aim4u's Avatar
 

Join Date: Aug 2012
Location: Michigan
Posts: 134
Default

Yeah see either an attorney or possibly a CPA when it comes to things like taxes, knowing what to do exactly will save you so much trouble in the long run. Good Luck!

aim4u is offline   Reply With Quote
Reply   

Bookmarks


Similar Threads
Thread Thread Starter Forum Replies Last Post
Starting Out In AdSense Mike.Bean Pay Per Click Advertising 12 28th August 2014 03:31 AM
Question About Starting An Online Competition Site mrwannabe General Small Business Issues 1 2nd August 2012 08:49 AM
Before You Even Think About Starting A Business MorpheusReturns What Type of Business Should I Start? 8 10th May 2010 08:49 PM
Starting Your Own Web Business-Explained Jaime M. General Small Business Issues 3 25th February 2010 05:41 AM
E-commerce Website Vs. Starting A Blog indieswal General Search Engine Marketing Information 10 16th February 2009 01:10 AM



Thread Tools

Get Updates
RSS Feeds:
RSS Feed for Small Business Finance RSS for this Category Only: Small Business Finance

RSS Feed for Small Business Ideas Forum RSS for Entire Forum
Forum Rules


Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Forum Jump


Small Business Ideas Forum


 
At Your Business - Small Business Directory
Free Business Forms - Prewritten Documents
 
Search Engine Guide
Small business guide to search marketing

 
Small Business Brief
Fetching the Best Small Business Info


Used Values - Free Links
Blue Book





All times are GMT -5. The time now is 06:51 AM.


Powered by vBulletin® Version 3.7.3
Copyright ©2000 - 2020, Jelsoft Enterprises Ltd.
Copyright 2004 - 2018 - Privacy