I’m sharing to discuss the basic entity structure options business owners have. Given the shift to a “gig” based economy, a lot of new business owners always seem to find themselves in tax trouble when they drive for Uber, or Door Dash, or even take on contract work.
Enter the simple, basic LLC, or Limited Liability Corporation.
It’s the go-to for new small businesses, and the costs for setting it up are almost always under $1,000, so the protections of a corporation (as well as the tax advantages) are within the grasp of anyone who is making money.
Depending on where you are geographically, though, yo0u might have more options than you think.
· Single-Member LLC/Sole Proprietorship
· General Partnership
· Family Limited Partnerships
· Series LLC
· Restricted LLCs
· L3C Company
· Anonymous LLC
· Member-Managed LLC or Manager-Managed LLC
Now, some of these are specific to certain states. New Mexico, for example, currently has the only Anonymous LLC, but the key is that all of these types do basically the same thing. They are all easily researched, and bear in mind, some will not be an option for you based on your specific situation.
Here’s the key takeaway, though: when you have your small business structured as an LLC, you have the “pass through” taxation most sole proprietorships are used to coupled with the corporate protections you absolutely need.
One thing that many business owners fail to take into account is the fact that new business divisions – or even products – can be broken off into their own LLC to truly test and vet them.
It might be more work, but if a new product or service is not really aligned with your “usual” business, then separating it as an entity is a smart idea, especially if you think the new venture is one that might be sold or developed along a different route than your primary business. Sure, this can create a little more work for bookkeeping and tax preparation, but it can also give you valuable metrics and data about how your new entity is developing – and its actual profitability.
The beauty of having multiple LLCs in lieu of one “big” one is the obvious one – they represent separate business ventures you’re involved in and, should one be sued or in financial dire straits, it can be dealt with directly and “protect” the other entities. Structured properly, even the simplest LLCs corporate veil can be protected, and that means protection for you as well as your other businesses.
None of this is to say that a single LLC is a bad thing, but as your business dealings get more complex (and successful!), it’s a great idea to have multiple LLCs set up. The cost is negligible, the protection is great, and my team and I are happy to advise you on – and assist you – in setting them up and making sure your taxes are easy to handle and understand.
As always, feel free to reach out and schedule a call to learn how to get the LLC protection that makes sense for your business.
