DMV Does LLCs 101 – Your LLC Questions Answered – Teachable Tuesday 10/26/2021

Hosted By: Jennifer Ward, DMV Does Chief Socialite
Presented By: Brian Pendergraft Esq., Doer

Your Questions Answered (Click To Skip To The Answer)

1. What is The Benefit of Starting an LLC?
2. Do I need an LLC to lease land lot to someone?
3. What are the Benefits of Different Entity Types?
4. How Much Does It Cost to Maintain an LLC?
5. Once You Have an LLC, What The Hell is Next?
6. How Do I Start an LLC?
7. How Do You Get an EIN number for an LLC.?
8. What Is The Purpose of a Registered Agent??
9. Is It Okay To Do Business Before Forming an LLC?
10. Can I Create Multiple LLCs Under One Name?
11. How Do I Get a Business Address That Is Acceptable By SDAT?
12. When Does Limited Liability Protection Fail?
13. How Soon Should I Hire an Attorney as Part of My Business Strategy?
14. Can You Compare and Contrast LLCs and S-Corps?
15. Corporation vs. LLC – which is better for solopreneurs in terms of tax savings and limiting liability?
16. Is it Complicated To Move an LLC?
17. Do You Suggest Having a Registered agent Outside of Yourself? Why or why not?
18. Can My Real Estate LLC Hold Rentals in 5 Different States?
19. What About Doing Business Internationally With an LLC?
20. What Is a B-Corporation?
21. Should I Put All of My Homes Into One LLC or Separate LLCs?
22. When Starting an LLC in Maryland For an Online E-Commerce Store, Do I Also Need a Business License?
23. Book Keeping Do’s and Don’ts?
24. Should I Form Different LLCs For Different Businesses?
25. Does an LLC Work For All Types of Businesses?/a>
26. Do You Have Any Book Recommendations About LLCs?
27. Does My LLC Have To Be In The State That I Live In?
28. When Creating an LLC For The DMV, Do I Need To Register In DC, MD & VA?
29. Is An LLC In Maryland Reƒquired To Have a Board of Directors?
30. Why Do Some Folks Incorporate in Delaware?
31. If a LLC Member is Subject To Levy For Personal Legal Judgments, Can The LLC Assets Be Impounded?
32. Do I NEED a Separate Bank Account For My LLC?
33. Who Should I Contact For Tax Advice?
34. How Do I Buy a Company Car or Anything With My LLC?
35. What Happens If I Fail To Maintain My LLC?
36. What Entity Should I Use When Forming a Non-Profit?
37. Does My LLC Have To Be In The Same State That I Live In?
38. What Are The Downsides of Forming an LLC?
39. What Are Parent-Child LLCs?
40. Why Do People Form LLCs in Nevada?
41. How Far Along in Staring a Business Should I Become an LLC?
42. How Soon Should I Hire an Attorney as Part of My Business Strategy?
43. What Is The Importance of Choosing a Low Risk Industry For Your LLC in Order to Obtain Business Credit?
44. Is an LLC a Tax Designation?
45. Am I Required To Still Get a Business License After Still Forming an LLC?
46. What Is The Importance of Operating Agreements Especially For Multiple Member LLCs?
47. Why You Should Keep All Your Paperwork and Receipts and Keep Them Organized?
48. Is Insurance Important and What Type of Insurance You Should Get?
49. Are EIN and TIN the Same Thing?
50. What Tax Docs Do I Need? I Never Know What’s Expected of Me Until Tax Time.
51. How Can We Charge & Pay Ourselves For Significant Home Maintenance Tasks That We (The Homeowner) Complete?
52. What Are Factors To Consider When Deciding If You Should Form a Partnership or Seek Investors?
53. What Are Factors To Consider When Creating a Business Succession Plan? Do You Need an Attorney To Help With That?
54. Is it Possible To Preserve The Start Date or History of a Sole Proprietor Business?
55. If I Am Starting an Online Business, What State Should I Register My Business In?
56. How Easy Is It To Convert a S-Corp To a LLC?
57. What Are The Benefits of a DBA if You Already Have an LLC?
58. Where Do I Find Funding?

What is The Benefit of Starting an LLC?

Here are the Benefits of LLCs over Sole Proprietorships:
1. Ability to change tax status. (ie can save money)
2. Advantageous for partnerships. – You’re personally protected from your partners/investors actions.
3. Liability protection. Great for operational business and rental property.
4. Business Credit. Entity = Tax ID #. Essential for building credit. Borrow solely in name of company.

Do I need an LLC to lease land lot to Someone?

No. LLCs are not required to do business.

But LLCs are very commonly used to rent real estate for personal asset protection. (Keeping you separate from your landlording business in case someone slips and falls on the property).

What are the Benefits of Different Entity Types?

Short Version:
• LLCs – Liability protection. Flexibility.
• S-Corp – Liability protection plus potential savings on SE tax.
• C-Corp – Corps primarily exist to serve large companies selling stock to thousands of shareholders. Generally formed to raise capital and to abide by securities laws. (Basically if you’re watching this presentation a C-corp is probably overkill).

How Much Does It Cost to Form and Maintain an LLC?

LLC Costs to consider:
• Filing fees and set up costs $0 – $1000
• Annual Maintenance Fees (Taxed just for doing business) – MD annual business personal property tax return costs $300 to file. DC biennial $200 return. VA $50 return.
• Tax return preparations and book keeping (I personally pay $750 to CPA and $1600 annually for bookkeeping).
• Registered agent service – (optional) – $99 per year (or less).
• Virtual Address (optional) – $99 per year or more.

Once You Have an LLC, What The Hell is Next?

• Act like you have an LLC
• Open a business account
• Accept payments in business name
• Make payments from business name
• Link bookkeeping app to business account to track activity
• Consult with a solid bookkeeper/CPA
• Get licenses your business may require
• Get insurance appropriate for your business

How Do I Start an LLC?

Three Different Ways:
1. DIY – (1) Draft “operating agreement” (rules for business). (2) File Articles of Organization with SDAT (MD), DCRA (DC), (3) Get EIN with IRS. (4) Open bank account.
2. LegalZoom or Similar Service Filing Service.
3. Hire an attorney (Definitely recommended for multi-member LLCs)

How Do You Get an EIN number for an LLC?

You can apply for your EIN online on the irs.gov website.

What Is The Purpose of a Registered Agent?

A registered agent is a person or entity designated to receive legal process for your LLC or Corporation. This is a requirement.

Is It Okay To Do Business Before Forming an LLC?

Yes. I see a lot of people get excited about forming businesses after watching presentations like this one, and then form them and never do any business.

I think it’s a great idea to use money that you make from your business activity to pay for your LLC formation and maintenance costs.

Can I Create Multiple LLCs Under One Name?

You can’t. At least not in the same State. Most Jurisdictions require entity names to be unique.

How Do I Get a Business Address That Is Acceptable By SDAT?

A “real business address” service can cost as low as $100 to $200 per year. They’ll let you use their business address for your registration for an annual fee. They also usually accept mail and you maybe able to meet with clients there.

When Are The Limits To The Liability Protection an LLC Provides?

Limited liability Does Not Apply If:
1. A member injures someone
2. A member personally guarantees a loan
3. If you fail to payroll taxes
4. If you fail to keep personal affairs separate from LLC operations (Don’t coming LLC and business funds)
5. Member does something fraudulent

How Soon Should I Hire an Attorney as Part of My Business Strategy?

Consider Hiring an Attorney If You Need Help With Any Legal Services. Attorneys can assist you with:
1. Arbitration, Mediation & Litigation
2. Business Formation
3. Contract Review and Drafting
4. Demand Letters
5. Eviction & Foreclosure
6. & More!

Can You Compare and Contrast LLCs, C-Corps and S-Corps?

1. Ownership Difference – LLC owners are “members”. Corporation owners are “Shareholders”. Corporations are great for issuing shares to investors and raising capital. Preferred by venture capitalist and investors.
2. Tax Difference – C-Corporations are taxed on corporate income and shareholder dividends. They’re taxed “twice”. LLCs by default have pass through taxation meaning profits and losses are passed through to personal tax return and there is not a tax at the corporate level. S-Corporations doesn’t pay tax on income, company revenue is reported as personal income. LLCs are generally” cheaper for businesses just starting. Once you make enough money, LLC is convertedS-corp is generally used to save on SE taxes. Consult with CPA. C-Corporations are best for public companies selling shares to thousands of people and complying with securities laws.

LLCs can elect to be taxed like a C-Corp, or an S-Corp. (Could save money this way) speak with CPA.

3. Maintenance Difference – Corporations are required to adopt bylaws, issue stock, hold annual director meetings. The formalities aren’t necessarily a bad thing. A lot of LLCs are run poorly with no meetings or business records. LLCs should be run properly just like corporations. 🙂

Corporation vs. LLC – which is better for solopreneurs in terms of tax savings and limiting liability?

1. For new solopreneurs -LLCs are generally the way to go.
2. They’re Typically more tax efficient than C-Corporations (at least for new businesses). Most individuals don’t make enough to C-Corp taxation is < passthrough taxation. However it's possible.
3. For limiting liability I don’t think one is better than the other.

Is it Complicated To Move an LLC To Another State?

Three Option to “Move” an LLC:
• Dissolve it then create a new one.
• Maintain it and foreign file.
• Merge old LLC into new one.

I don’t think any of the options are complicated. 🙂

Do You Suggest Having a Registered agent Outside of Yourself? Why or why not?

Yes. Unless you’re okay with people popping up on you and trying to track you down to serve you. And, the service is relatively inexpensive.

They are also generally better at not missing service.

Can My Real Estate LLC Hold Rentals in 5 Different States?

• You may need to register as a foreign entity if you’re “doing business.” Doing business is defined differently by each state.
• Generally renting property is considered “doing business.”
• As a general rule, rental properties should be in their own LLC where the property is located.

What About Doing Business Internationally With an LLC?

Too complicated for this LLC 101 presentation because International business is complicated.

What Is a B-Corporation?

A Benefit Corporation (B-Corp) Is. But in addition to being profit they are also supposed to have a positive impact on society, workers, community and the environment.

Should I Put All of My Homes Into One LLC or Separate LLCs?

1. Your LLC is like a bucket. If one of your tenants get injured on the property they can go after all of the assets in a bucket.
2. Maintaining multiple buckets costs more.
3. Divvy up your assets between buckets in the way you feel the most comfortable.
4. Would you feel most comfortable with 1, 2, or 3 buckets?

When Starting an LLC in Maryland For an Online E-Commerce Store, Do I Also Need a Business License?

A license is not required for e-commerce businesses if you are strictly selling homemade goods.

If you should start to hold additional inventory to sell retail then a trader’s license will be required.

Book Keeping Do’s and Don’ts?

I don’t know. I outsource my bookkeeping to a virtual bookkeeping service so I can focus on lawyering. I recommend you do the same so you can focus on doing what you do.

Should I Form Different LLCs For Different Businesses?

• Assuming you can maintain the cost of multiple LLCs, the best practice is to have different LLCs for unrelated businesses. This way they are insulated from one another.
• However, to save money you can operate under the same business entity. But if something goes wrong at one business, all your businesses under the same umbrella are on the hook.

Does an LLC Work For All Types of Businesses?

Yes. But it may not be the best depend.

Do You Have Any Book Recommendations About LLCs?

I like The Tax & Legal Playbook. It’s written by an Attorney that’s a CPA. Good tax and legal knowledge.

Does My LLC Have To Be In The State That I Live In?

No but your home state will most likely require you to register your business as a foreign entity in if you’re doing business in it.

When Creating an LLC For The DMV, Do I Need To Register In DC, MD & VA To Serve All Three?

• Register in your home jurisdiction where you will probably do business the most. (For me it’s MD).
• Most jurisdictions require you to “foreign file” if you’re “doing business” there.
• D.C. Law Library – § 29–105.05. Activities not constituting doing business. (dccouncil.us)

Is An LLC In Maryland Required To Have a Board of Directors?

Why Do Some Folks Incorporate in Delaware?

US residents should generally incorporate in their home state where they are primarily doing business because your jurisdiction will most likely require you to register as a foreign entity (negating the benefits of Delaware entities. That said, here are some benefits of Delaware LLCs:
• Delaware is very business friendly.
• 8.7% corporate income tax rate
• 0% rate of sales tax
• Privacy – Doesn’t require Officers or Directors on formation documents
• Privacy, cheaper filing fees, no income tax, investors love it.

If a LLC Member is Subject To Levy For Personal Legal Judgments, Can The LLC Assets Be Impounded?

If single member they can attempt to foreclose on your LLC interest if they get a judgment against you and go after its assets.

If multi-member “charging orders” are typically used to get distributions due to you sent to the creditors instead.

Do I NEED a Separate Bank Account For My LLC?

Absolutely. You have a business now! You have to separate your business activity and personal activity.

Who Should I Contact For Tax Advice?

DMV Does Members That Handle Tax Matters:
1. Sakinah Tillman, Esq. LLM – Tax Attorney
2. Contact me to be added here if you’re in DMV Does

How Do I Buy a Company Car or Anything With My LLC?

How to buy anything with your LLC:
• Pay using your LLC Business Card/Check (You need a business bank account to pay out of)
• Sign all contracts as authorized person of LLC., and not as yourself.

What Happens If I Fail To Maintain and Upkeep My LLC?

I’ll use this opportunity to explain the statuses of an LLC:
• Good Standing – You pay your taxes and do your filings annually. Good to go.
• Not in Good Standing – Typically you don’t pay the taxes and do your annual filings. (could also be other things). Correct the defects.
• Forfeitted – It loses it’s right to operate in the State.
• Revived – Reinstated (You may have to pay to do this).
• Voluntarily Dissolved – Voluntarily ended.

What Entity Should I Use When Forming a Non-Profit?

Non-profits are generally formed as Corporations.

Why? For an LLC non profit, all members (owners) of the LLC must also be non-profit organization. So you’d have to form a Corp. non-profit to be the owner of the LLC non-profit.

For that reason it’s simplest to form a non-profit as a Corporation.

Does My LLC Have To Be In The Same State That I Live In?

No but it should (generally if you’re doing business in it).

What Are The Downsides of Forming an LLC?

• They cost money to maintain.
• LLCs have to be represented by an attorney in most court proceedings. (That costs money).

What Are Parent-Child LLCs?

Parent-Child LLC (or Company in General? Explained:
• If a company has controlling interest another company (51% or more), they are the parent company.
• The controlled company is a subsidiary.
• Examples: Facebooks subsidiary company is Instagram.

Why Do People Form LLCs in Nevada?

Assuming you do business in your homestate, it negates the purpose of forming in Nevada. That said, the benefits of Nevada:
• As a general rule you should incorporate in your home State.
• Nevada has no State corporate income tax and imposes no fees on corporate shares.
• There is neither personal income tax nor franchise tax for corporations or LLCs (but initial and annual statement fees and a business license fee apply).
• Shareholders, directors and officers of a corporation or members or managers of an LLC don’t need to be Nevada residents.

How Far Along in Staring a Business Should I Become an LLC?

As soon as you can comfortably afford to pay for it. 🙂

How Soon Should I Hire an Attorney as Part of My Business Strategy?

Hire Me as Soon as Possible! (Serious answer is I don’t know. But see if you can consult with one and learn how yall can work together.

What Is The Importance of Choosing a Low Risk Industry For Your LLC in Order to Obtain Business Credit?

I Have No Idea.

Is an LLC a Tax Designation?

No.

Am I Required To Still Get a Business License After Still Forming an LLC?

Possibly. Depends on your product and services. Most do require licenses. For example, I require a license to practice law to sell legal services.

What Is The Importance of Operating Agreements Especially For Multiple Member LLCs?

Questions that we don’t know the answer to if there is no operating agreement amongst members:
• What happens if a member wants to sell?
• What happens if there’s a dispute amongst the members?
• Can a partner start a competing business?
• And plenty more!

Why You Should Keep All Your Paperwork and Receipts and Keep Them Organized?

Lenora will charge your more for her tax services if you give her more work to do.

Is Insurance Important and What Type of Insurance You Should Get?

It’s very important. It varies depending on your type of business. For example I have legal malpractice insurance because I provide legal services.

Are EIN and TIN the Same Thing?

• EIN = Employer Identification Number
• TIN = Tax ID Number. An EIN is a form of Tax ID Number (Another example is SSN).

What Tax Docs Do I Need? I Never Know What’s Expected of Me Until Tax Time.

I Don’t Know Either. I highly recommend outsourcing that to bookkeepers and CPA’s.

How Can We Charge & Pay Ourselves For Significant Home Maintenance Tasks That We (The Homeowner) Complete?

There may be a way to characterize the work you do in the home as a home office maintenance cost. Speak to a good CPA or Tax Attorney to see what home repairs can be deducted.

What Are Factors To Consider When Deciding If You Should Form a Partnership or Seek Investors?

Some questions to consider:
• How will revenue profits or losses be shared?
• Who or whom is responsible for day to day activities of the venture?
• What say do investors have?
• What happens if you can’t reach a decision on a major issue?
• What happens if a partner wants out?
• And many more questions!

What Are Factors To Consider When Creating a Business Succession Plan? Do You Need an Attorney To Help With That?

Succession plan – Estate plan for your business. What happens when you retire, die, can’t afford to do it anymore, etc.

For solopreneurs and small businesses, you have to train people to be able to fill your shoes.

Or maybe if you’re a solo-attorney it might mean making sure another attorney is able to take over your files if something happens to you.

Do I have a system in place where another attorney could easily pick up my cases and start working?

What happens to your shares? Do they go to your family?

An attorney is needed for a succession plan like they are needed for an estate plan. Meaning technically no but it’s an extremely prudent to hire an attorney for it.

Is it Possible To Preserve The Start Date or History of a Sole Proprietor Business?

You can list the official start date of the business in your articles and your operating agreement. You can use that as the “official” start date.

However, the registration date for your LLC is the date that it was registered.

If I Am Starting an Online Business, What State Should I Register My Business In?

If you are not a U.S. Resident: I’d go with one of the super business friendly States like Delaware, Nevada, Wyoming.

If you’re a U.S. Resident at you operate your online business mostly from your home State, then you should register in your home State.

How Easy Is It To Convert a S-Corp To a LLC?

• Articles of Conversion need to be filed to convert one entity to another. Has to be approved by shareholders/members.
• Tax consequences – May cost you taxes to do this. Consult with CPA/Tax attorney prior to doing this.

What Are The Benefits of a DBA if You Already Have an LLC?

In my case it’s because TPF Legal sounds cooler than The Pendergraft Firm.

Your DBA might sound cooler!

Where Do I Find Funding?

Ask DMV Does For Seed Money. 🙂