Choosing a Business Entity: Limited Liability Company (LLC)
The limited liability company is a hybrid type of business structure. It contains elements of both a traditional partnership and a corporation. The limited liability company form of business structure is relatively new. Only in the last few years has it become available as a form of business in all 50 states and Washington D.C. Its uniqueness is that it offers the limited personal liability of a corporation and the tax benefits of a partnership. A limited liability company consists of one or more members/owners who actively manage the business of the limited liability company. There may also be nonmember managers employed to handle the business.
In as much as the business form is still similar to a partnership in operation, there is still a potential for conflict among the members/owners of a limited liability company. Limited liability companies are formed according to individual state law, generally by filing formal Articles of Organization of a Limited Liability Company with the proper state authorities in the state of formation. Limited liability companies are, generally, a more complex form of business operation than either the sole proprietorship or the standard partnership. They are subject to more paperwork requirements than a simple partnership but somewhat less than a corporation. Limited liability companies are also subject to far more state regulations regarding both their formation and their operation than either a sole proprietorship or a partnership. In all states, they are also required to pay fees for beginning the company, and in some states, annual franchise fees of often hundreds of dollars are assessed for the right to operate as a limited liability company. Similar to traditional partnerships, the limited liability company has an inherent lack of continuity. In recent years, however, an increasing number of states have allowed limited liability companies to exist for a perpetual duration, as may corporations. Even if the duration of a limited liability company is perpetual, however, there may be difficulties if the sole member of a one-member limited liability company becomes disabled or dies. These problems can be overcome to some extent by providing, in the Articles of Organization of the limited liability company, for an immediate reorganization of the limited liability company with the deceased member’s heirs or estate becoming members of the company. In addition, similar to partnerships, it may be difficult to sell or transfer ownership interests in a limited liability company.
The members/owners in such a business enjoy a limited liability, similar to that of a shareholder in a corporation. In general, their risk is limited to the amount of their investment in the limited liability company. Since none of the members will have personal liability and may not necessarily be required to personally perform any tasks of management, it is easier to attract investors to the limited liability company form of business than to a traditional partnership. The members will share in the potential profits and in the tax deductions of the limited liability company, but in fewer of the financial risks involved. Since the limited liability company is generally taxed as a partnership, the profits and losses of the company pass directly to each member and are taxed only at the individual level. A further advantage of this type of business structure is that it offers a relatively flexible management structure. The company may be managed either by members (owners) themselves or by managers who may or may not be members. Thus, depending on needs or desires, the limited liability company can be a hands-on, owner-managed company or a relatively hands-off operation for its members/owners where hired managers actually operate the company. A final advantage is that limited liability companies are allowed more flexibility than corporations in how profits and losses are actually allocated to the members/owners. Thus, one member/owner may be allocated 50 percent of the profits (or losses) even though that member/owner only contributed 10 percent of the capital to start the company. “Choosing a Business Entity” © Nova Publishing Company, 2005
Running an LLC
Running an LLC will mean that you have to encounter many of the various tax forms that any business would have to encounter – filing the right paperwork to hire people, file taxes, and generally run business as any other company would. But if you want to define specific forms relating to an LLC, it’s important that we do so now. Many of these issues relate to tax forms, and the good news about LLCs is that there’s a great amount of flexibility in the way you file taxes. For example, if you are a sole proprietor LLC, you can file taxes essentially as a sole proprietor, even if you have to report that your income goes to your LLC. These tax forms will not be very different from the tax forms you currently file now if you’re already a sole proprietorship.
Things You Need To Know About Real Estate Investing
A good investor is someone who is really understands what they are putting their hard-earned money into. Don't be someone who just blindly follows someone who says that it is a good investment. That is the quickest way to lose everything. Below you will find a good article that will teach you how to spot a good investment. Continue on for good ideas and tips about investment.
Make sure that you create a game plan for what you desire to accomplish. Figure out how much time the process will take and if it will be worth your while. When you have developed a plan, meet with the necessary parties to discuss the deal that you want to achieve.Set up a Cash Line for your eBay Business when You need it! Get up to $100K in 7 minutes with Kabbage. Sign up now!
When buying real estate as an investment, it's good practice to have a dependable and affordable handyman working for you. Otherwise, your extra cash will be depleted by high repair expenses. A dependable handyman will also come in handy for after-hours tenant emergencies.
Consider building up a real estate rental portfolio that can continue to provide you with consistent profit for retirement purposes. While purchasing homes to sell for profit is still possible, it is less of a reality in today's world than it has been in the past. Building up rental income by purchasing the right properties is trending vs flipping homes due to the current housing market.
Do a little research on the government of a city before you buy real estate in that area. There should be a website online that was made for that city. With a little research, you can get information about city planning that may affect property prices. A city that is growing might be a great investment.
Get your funding in check prior to scouting homes. You are wasting time if you don't know where the finances will come from. In fact, the delay after you've found the perfect home can be the difference between you getting the home and not! The best properties will always have a line of interested investors.
Always be prepared to calculate before you make an investment in real estate. Calculate your lending costs, any repairs and updating that may need to be done as well as how long you might be left holding the property. While the selling price may look good, there are numerous other factors to consider before buying.
Stay away from investment property that is priced too high or too low. If you put too much money in, it's harder to make a decent profit. And a price that's too low can signify hidden issues. It may cost you a ton just to get it to a good selling place. Look for a mid-range price property in decent condition with relatively low maintenance.
Don't purchase an investment property based only on tax laws alone. Tax codes are constantly changing, so it is important that there is more value to your property as opposed to just the lower taxes. Invest in a property because you see it turning a good profit even years from now when the taxes may increase.
Realize that real estate investing can be a tough business. There is always risk and negotiation skills and patience are demanded. While a few properties may make money back quickly and with no pressure, many times the business of real estate is stressful and cut-throat, so prepare yourself.
Sit down and make a detailed plan for yourself. Being successful with real estate investment requires time and resolve and considerable planning. Sit down and chart out your goals. What do you hope to accomplish? Make sure that your finances and your schedule can accommodate everything you have in mind.
Patience is key when you're looking to buy a property that is within your spending limit. You may want to stretch your finances, but you should avoid it. Try expanding your search for property to increase your odds of finding something worthwhile.