Dont File Your LLC Until Youre Able Answer THESE 8 Questions

You don’t need a lawyer to set up an LLC. In fact, you don’t even need one of those services like LegalZoom or Inkfile. You can literally set up your own LLC directly with the Secretary of State. But before you get all gung-ho and run out and set up your own LLC, here are 8 questions you should ask yourself before you do that. Where should I file my LLC? Just because my asset or my business is located in one particular state, doesn’t mean I should set up my LLC there. I mean, do you know which states offer the best asset protection laws and which state makes the most sense for your particular situation? And where does your LLC fit into your overall asset protection structure? Because the purpose of your LLC will dictate where to set up that LLC in the first place. Number 2, how many LLCs shall I create for my business or assets? Should I put all of my assets in one LLC? Or shall I spread out my assets among several LLCs to maximize my asset protection? If my business, for example, owns valuable equipment or real estate, it’s probably a good idea to separate those into separate LLC. How many LLCs is too much? Number 3, who are going to be the managers and members of your LLC? For asset protection purposes, you generally don’t want to have the manager and the member be the same person or the same entity. There are some privacy considerations that I will go through in number 5, but also there might be some tax advantages to set up a separate LLC to be the manager of the LLC that you’re creating. Number 4, do I need an operating agreement? Most states don’t mandate that you have an operating agreement for your LLC, but you should rarely set up an LLC without one. Make sure you have well-drafted and customized operating agreements for your specific situation in order to maximize your asset protection and to avoid any legal problems down the road, especially if you have other members. Number 5 is what are the privacy considerations? Unless you take specific precautions at the time you set up the LLC, your private information will be a matter of public record. Are you comfortable with this? If not, there are options to protect your privacy, including hiring a nominee or even setting up the LLC in a state that doesn’t report membership or management. Number 6 is should I hire a professional registered agent or shall I just act as my own? Now, if you live in the state where the LLC is formed, then you can act as your own registered agent as long as you’re present at the registered business during normal business hours. Do you want that obligation? And maybe more importantly, are you okay with people knowing where you live and knocking at your door at crazy hours serving you with some legal documentation? What if you’re away on vacation when your entity gets sued with legal papers? You may be involved in a lawsuit and not even know it, maybe even resulting in a default judgment. Number 7 is do I need an employer identification number, an EIN? Even with zero employees, you want to have an EIN because you want to set up a bank account, a specific bank account for that LLC. You’re trying to show the world that you are separate and distinct from your LLC. And one of the easiest ways to do that is to, number 1, have a separate bank account. And number 2, that bank account should be set up in the state where that LLC is located so you have an additional nexus, an additional connection with that particular state. Having as many connections with the state is really, really important because you want the laws of that state to apply if there’s any asset protection issues. And the more connections you have with that state, the better. Number 8 is how am I going to tax my LLC? You know, one of the beauties of the LLC is that you can tax it pretty much however you want. So you can have it taxed as a partnership, as an S-corp, or even as a C-corp. Whatever you do, do not set up an S-corp. Always set up an LLC first and have it elected to be taxed as an S-corp, as I discussed in more detail in this video.

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