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How to form a California LLC without a lawyer

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Re: How to form a California LLC without a lawyer

#71

Post by jameslk »

Stratoscope wrote: post #60
jameslk wrote: post #55

Earlier quoted context omitted.

I have a California LLC too. It's not any harder than the steps explained in the article. Certainly don't form an LLC unless you need one. You'll know you need one when you need one. > Now guess what? You have to start filing 1120S corporate taxes plus the California equivalent. All the LLC/S Corp income flows right through onto your personal tax return, but you also get to get to file 940 and 941 payroll tax forms a…

That's a really good point, thanks for mentioning it. Looking back on this, if it had been just an LLC it would have been no big deal at all. It would be a "disregarded entity" with ordinary 1099/Schedule C income, no different from any of my previous clients, with an easy tax return like the ones I'd done many times before. It was the S Corp election which this client required that really messed everything up. In hi…

It definitely sounds like a terrible client, especially making you jump through these hoops just to work with them. Sometimes it's hard to know until you've started working with them how the relationship will turn out. A client forcing you to form an S-corp and put yourself on payroll doesn't exactly establish trust and is probably a bad sign of things to come.

Despite this, I wouldn't let it sour your view of self-employed work. I was an independent contractor for 6 years and then started a more formal business after. The freedom of picking where, when and how you work, who you work with, how much you'll charge, and most rewarding of all, building and owning your own thing, can be very fulfilling. Maybe you had other reasons to desire employment again, this is certainly not for everyone, but if it's all interesting to you, it's worth it just for the personal growth.

Re: How to form a California LLC without a lawyer

#72

Post by arrosenberg »

Stratoscope wrote: post #47
c17r wrote: post #46

Earlier quoted context omitted.

I've never run into a case where the client cared how I reported my taxes. How would they even know? Did they give you a reason for this?

Thanks for asking. They were a California company, and this state has gotten very strict on such things, doing their best to shut down the ability for people to work as independent contractors. It really sucks, but you can't fight city hall. The idea was that the LLC/S Corp would give my client some protection against anyone claiming that the client would owe employment taxes on what they paid me. So I had to be my o…

I think that was more about the client having a hang up than the state or AB5. You either pay payroll taxes as an S-Corp, or you pay self-employment taxes if you take pass-through taxation. Regardless of which taxation method you selected, the company would still be on the hook if you later complain to the Department of Labor that you were misclassified.

Re: How to form a California LLC without a lawyer

#73

Post by gamblor956 »

Stratoscope wrote: post #38

I have a California LLC and wish I didn't. It has been nothing but an albatross around my neck. I am almost certain I will shut it down at the end of this year. Look, if you're reading articles like this one, don't do it. Just don't do it. Get competent legal and accounting advice first. I formed my LLC four years ago when an interesting contracting project came my way. I'd worked as a 1099/Schedule C contractor in t…

Somehow thousands of people can form and run CA LLCs and S corps just fine without issue.

If you can't handle a little bit of paperwork you have no business trying to run a company.

Re: How to form a California LLC without a lawyer

#74

Post by gamblor956 »

ISL wrote: post #48
Stratoscope wrote: post #38

I have a California LLC and wish I didn't. It has been nothing but an albatross around my neck. I am almost certain I will shut it down at the end of this year. Look, if you're reading articles like this one, don't do it. Just don't do it. Get competent legal and accounting advice first. I formed my LLC four years ago when an interesting contracting project came my way. I'd worked as a 1099/Schedule C contractor in t…

Seconded. Filing the 1040 is straightforward compared to the 1120S, and the minimum taxes are real (my experience was NYS, with incorporation in NH for historical reasons). The 1040 instructions are maddening but nigh-complete. A thoughtful person with enough time on their hands has a prayer of figuring out even relatively subtle tax issues. The 1120S instructions as recently as ~2015, on the other hand, feel like va…

The calculation of business income tax really is that simple...

It only gets complicated of you want to make it complicated.

Re: How to form a California LLC without a lawyer

#75

Post by gamblor956 »

Stratoscope wrote: post #47
c17r wrote: post #46

Earlier quoted context omitted.

I've never run into a case where the client cared how I reported my taxes. How would they even know? Did they give you a reason for this?

Thanks for asking. They were a California company, and this state has gotten very strict on such things, doing their best to shut down the ability for people to work as independent contractors. It really sucks, but you can't fight city hall. The idea was that the LLC/S Corp would give my client some protection against anyone claiming that the client would owe employment taxes on what they paid me. So I had to be my o…

You clearly misunderstood something because that's not a CA law and that isn't how a consultant or contractor would prove their legal entitys existence to a client.

Re: How to form a California LLC without a lawyer

#76

Post by [deleted] »

ramraj07 wrote: post #63
cobbzilla wrote: post #54

Earlier quoted context omitted.

Companies that are entirely foreign-owned are perfectly legal. You do not need a US-based partner. But if you're not a US-citizen and want to create a company in the US, I would highly recommend NOT forming it in California, for cost/paperwork reasons. There are many other US states that are much more business-friendly to choose from.

What if you have to bill clients incorporated in CA?

[deleted]

Re: How to form a California LLC without a lawyer

#78

Post by SoylentYellow »

Stratoscope wrote: post #60
jameslk wrote: post #55

Earlier quoted context omitted.

I have a California LLC too. It's not any harder than the steps explained in the article. Certainly don't form an LLC unless you need one. You'll know you need one when you need one. > Now guess what? You have to start filing 1120S corporate taxes plus the California equivalent. All the LLC/S Corp income flows right through onto your personal tax return, but you also get to get to file 940 and 941 payroll tax forms a…

That's a really good point, thanks for mentioning it. Looking back on this, if it had been just an LLC it would have been no big deal at all. It would be a "disregarded entity" with ordinary 1099/Schedule C income, no different from any of my previous clients, with an easy tax return like the ones I'd done many times before. It was the S Corp election which this client required that really messed everything up. In hi…

Why did your client care about how the government taxed your LLC?

Re: How to form a California LLC without a lawyer

#79

Post by giancarlostoro »

PopeDotNinja wrote: post #69
gojomo wrote: post #58

The article claims as a second benefit of an LLC: > 2. Tax benefits. You can deduct qualified business expenses from the total income of the business. Here’s a simple example: If you spent $1,000 on servers and your website made $10,000, then you’ll only pay taxes on the $9,000 in profit. You don't need an LLC to deduct such expenses. Even sole proprietors can deduct business expenses against business profits.

A single member LLC in California is treated exactly like a sole proprietorship for tax purposes, except it costs you $800 per year. Unless you know you need it, you probably don’t need it. It won’t protect you from lawsuits, you’ll still have to provide personal guarantees on loans, etc. Source: had single member CA LLC and wasted $800/year for a few years on it.

> It won’t protect you from lawsuits,

This sounds misinformed. The point of an LLC as far as I have always understood it is that if someone sues your company they cannot take your personal assets as collateral but only that which belongs to the company. If someone sues you, you can lose a crappy small LLC or would you rather lose your home as part of a settlement cause somebody is a monster.

Feel free to correct me if I am wrong on this or if this is a misconception.

Re: How to form a California LLC without a lawyer

#80

Post by LordAtlas »

stillmotion wrote: post #3
flowerlad wrote: post #2

Cheaper to register in Delaware. Only $300 per year in LLC tax vs $800.

You still have to pay a minimum of $800 a year to the franchise tax board for operating a non-Californian business.

As a non-US citizen, California taxes and fees seem ridiculous.
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