Ash and I had been going back and forth on the issue of Partnership vs LLC. One day we were positive that a Partnership was definitely the way to go and the next day the LLC seemed more attractive. Because we did not fully understand the impact of choosing one over the other, we decided to forgo woman’s prerogative, visit our Taxman and let him help us sort this out.
LLC- Limited Liability Corp.
A LLC provides limited liability with some flexibility and detailed documentation on how a business will be managed and profits handled. LLC also provides certain protections that are not available under a partnership.
In truth, we were not overly concerned about what would happen should someone choose to litigate against us, but our Taxman helped us to understand why this was important. With an LLC, the assets of the business would be up for grabs but our personal homes, cars etc., would be safe.
The biggest negative to the LLC was that, in California, business owners are assessed a fee of $800.00 per year - every year. This $800.00 must be paid whether you have made any money or not, is due within 90 days from the date we first obtain our LLC and is due every April 15th thereafter. Not to mention, the fees due to our Taxman for filing.
Most other states did not have fees anywhere close to $800.00 per year, but we have to pay for all this sunshine some kind of way.
A Partnership offers relatively low fees, but perhaps the biggest negatives for us were the fact that our personal assets could be placed at risk and the business taxes would be included in with our personal income taxes. We were not sure what kind of impact this would have one way or the other but it seemed really smart to keep home and business separate.
So, after must discussion, we decided to go with the LLC. In spite of that darn $800.00 yearly fee we felt that a LLC was the best option for us.
Now, keep in mind that every state is different so don’t take our word for it. Take the time to research the requirements for your particular state and go with what works best for you.
Now the paperwork is filed and we eagerly await word of our brand new LLC documents and Tax Identification number.
By the way, we love to pass on great resources when we come across them. Our Taxman, Joseph “The Tax Man” Ginn is very reasonably priced, extremely knowledgeable and forthcoming. Joe has a way of making you feel comfortable - no question is a dumb question.
If you have tax issues or questions, feel free to contact Joe at the information below:
We were not compensated in any way for this recommendation. Joe is just awesome to work with and we just wanted to pass that on.
Next Blog - It Sounded Like a Good Idea at the Time.