When you create an LLC you are creating an entity that is completely separate from the owners who are called members. The LLC will continue to exist until dissolved. The LLC combines many of the strengths of both corporations and partnerships. The members have liability protections similar to a corporation. They are shielded from liability for the LLC’s debts, obligations and liabilities. However, they have the benefit of partnership type federal tax treatment.
One of the first decisions to be made is the name of the business. When forming as an LLC you must include Limited Liability Company, Limited Company or an abbreviation of one of these in the name of the business.
It is important to be familiar with any state or local requirements for the business you intend to run. Are there professional license requirements that exist? Hairdresser, employment agency or real estate agent are just a few of the businesses that have licensing requirements. You will also need to check with the city for any permits that are required. For example, a restaurant will need a permit from the local health department and a liquor license if they offer alcoholic beverages.
If the business will be involved in transactions that are subject to sales tax the seller must obtain a sales and use tax permit. The margin tax became law effective 1/1/08 replacing the franchise tax. With the margin tax there is a presumption of taxability. Sole proprietorships, general partnerships owned by natural persons, and certain non-profit and investment entities are excluded from the tax. The margin tax is a tax on the gross profit margin of the business.
A discussion with an attorney and CPA will help determine if an LLC is the best structure for your new business.
Law Offices of Debbie J. Cunningham
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