Earlier quoted context omitted.
how do you know ?
I’ve incorporated in CA before. Top poster is correct.
I just asked it because he asked us to, I trusted him.
How to form a California LLC without a lawyer
181–190 of 200 posts
Re: How to form a California LLC without a lawyer
#182The absolute horrible thing about forming a Llc in California is the $800 FTB tax, that you have to pay irrespective of wether you have any income or not. This is really discouraging for any individual who is trying to start a business and is unsure of the outcome in the initial years.
That’s ~$67/mo to stay in business. I don’t see how this can be considered a horrible thing.
Probably not much for a brick and mortar store or a software consultant, but think about the vendors selling pizza or hotdogs on the street.
Alternatively, if you are involved in a few startups with losses, it can add up really fast.
Re: How to form a California LLC without a lawyer
#183Earlier quoted context omitted.
It depends. For any kind of Limited Liability Company, it cannot be done online, you need to see a notary. Costs and process differ depending on what exactly you want: * Forming a full GmbH will cost around 1000-2000 EUR for lawyer,notary,tax accountant. You strictly speaking don't need lawyer nor tax accountant, but unless you are very familiar with the process, I'd recommend you enlist their services. It will make…
> Keep in mind that moving money in to and out of limited liability companies is not trivial, so you should have sufficient founding capital to cover the initial expected expenses. Can you not, as an owner or director, loan money to the company to cover initial expenses? In the UK it's common to run a Directors Loan Account. With the DLA you can lend money to the company to start things up, or pay for things personal…
You can loan money to your own company as shareholder. However, there are a few things to keep in mind:
* a shareholder loan is treated like capital - it’s the last loan to receive payment if the company folds. Probably not a problem in most single person LLCs, it important to keep in mind when it happens. If you pay your own loan and default on another, that’s a crime.
* you cannot in general make up arbitrary terms. The loan must be made with terms that a third party would agree to (“wie unter fremden Dritten”). That means you should - even for your own company - have a contract in place.
Borrowing from the company is possible, but if you give yourself too favorable terms, this could end up being treated as a hidden payment (verdeckte Gewinnentnahme) and that’s tax fraud. Tax litigation has the uncomfortable rule that the burden of proof is reversed- you need to prove your books are in order. If you can’t, tax authorities win the money.
Same if you start paying yourself a salary, but end up not paying on a regular basis. It’s ok if it happens a few times, but a salary should be somewhat regular.
I’d say it’s generally easier to pony up a little cash to cover the initial expenses if you can. I don’t see too much benefit in not having at least some founding capital. You’ll have to come up with the money anyways and it’s not going to sit in the bank account unused.
It’s better to find other ways to make things smooth. For example you can be managing director without drawing a salary.
Re: How to form a California LLC without a lawyer
#184I 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…
> Do not try to do this yourself. You will get it wrong.
I did it myself and got it right? I closed my LLC last year, not for reasons related to managing the LLC itself.
It's not "hard". It just requires a lot of knowledge of process and filings required. Most folks are best using a CPA to handle it.
It is absolutely best to contract under an LLC or S Corp umbrella, vs personally. You need the liability protection. Perhaps not as much for software, I suppose. But if an average plumber / salon owner / painter / tradesman can get it right, so can you.
> you must use a payroll service to pay yourself.
you don't need to. it's way easier to do the payroll taxes, so you absolutely should, but it's not a hard requirement.
but you don't need to be on the payroll at all. you can take a draw, or take distributions instead. there are tradeoffs for all 3 methods.
> Forget about the fabled "corporate veil". If the IRS and FTB decide they want their money, they are going to get it.
The corporate veil isn't about taxes, at all.
Re: How to form a California LLC without a lawyer
#185Why would you want to as opposed to Delaware?
Delaware adds a layer of corporate law which is only applicable and beneficial to C corporations. LLCs are not actually a "corporation" so you don't get that benefit. The extra convolution brings only hassle, and no benefit.
Re: How to form a California LLC without a lawyer
#186The 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.
> 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. I wonder if this is correct. Many places require you to deprecate assets such as computers over many years, so the deductions are not all taken out of your profit the year you buy them. Sounds like this article is conflating the legalities of setting up a business with the accounting of operating one, t…
It depends on what "spent $1,000 on servers" means
If you bought (and own) servers, you must depreciate and amortize them. These are capital expenditures, aka capex
If you rented servers (e.g. AWS, GCP), you deduct the entire cost when it is incurred (or realized, depending on the details). This is an operational expense, aka opex
Re: How to form a California LLC without a lawyer
#187Re: How to form a California LLC without a lawyer
#188Earlier quoted context omitted.
In the Netherlands it was about €75, filled most of the paperwork out online although we did have to go in to the KVK (Chamber of Commerce) to complete the process.
It's €50 right now, but you normally have to spend a bit extra for notary fees to get the share capital notarised.
Yeah, 75 was probably all the fees, and I might have been thinking in $USD
Re: How to form a California LLC without a lawyer
#189The absolute horrible thing about forming a Llc in California is the $800 FTB tax, that you have to pay irrespective of wether you have any income or not. This is really discouraging for any individual who is trying to start a business and is unsure of the outcome in the initial years.
That’s ~$67/mo to stay in business. I don’t see how this can be considered a horrible thing.
Not quite. It's $67/month to just be able to try to stay in business. What benefit does that tax provide to start-ups, and why isn't it a function of the product the business produces instead of the flat rate that's imposed?
Re: How to form a California LLC without a lawyer
#190Earlier quoted context omitted.
To get people to move to Texas and free up the real estate. /s
>To get people to move to Texas and free up the real estate. /s See also: "To get people to move to Texas and create CA's regulatory environment there."
That is, unfortunately, also true. They move to Austin, and vote the same way they did in CA, with predictable results.