It’s Women’s Entrepreneurship Day – a holiday to celebrate being a hardworking woman!
*All women stand up!*
So on this day, it’s good to discuss business and give tools and resources to entrepreneurs and small business owners to help them grow their companies.
One good topic to discuss is something that a lot of people do not think about when starting a business: getting an LLC.
An LLC is a limited liability company that’s a hybrid business structure that combines simplicity, flexibility, and tax advantages to merge together into a partnership for the protection of a company. A company can have as many owners as it would like, so if you’ve been itching to start your own business, today is a perfect day to do so!
Here are advantages and disadvantages to having an LLC:
- It’s simple: Depending on where you live, the fee to pay for an LLC is rather inexpensive. For example, in Louisiana, it costs $100. However, in bigger states like California, it’ll cost $70 to file one, but $800 for franchise tax. It’s always important to do your research prior so to budget your money.
- Pass-through taxation: The owner(s) does not have to pay any LLC taxes nor corporate taxes. The company’s income and expenses pass-through to the owner’s personal tax returns as well as their personal income tax on any profits.
- According to NerdWallet, there’s flexibility in managing the LLC. This is good for someone who does not have a lot of experience in running a business or who does not know how to manage workers. This advantage allows the owner(s) to be managed by other owners and for them to share in the day-to-day decision making.
- Nerdwallet also warns about the self-employment tax that’s activated once someone gets an LLC. The IRS sees the LLC as a partnership for tax purposes. In that case, the LLC is taxed and the government considers that the owner(s) who work under this LLC are self-employed. This means that the owner(s) is responsible for paying Social Security as well as Medicare taxes, which are known as self-employment tax and are based on the business’s total net earnings. However, this could change if the LLC file forms are going to be taxed as an S corporation, where the owners will only have to pay for the Social Security and Medicare taxes based on compensation. Once again, do the research to decide what is best for your business.
- It’s tedious work: the owner must make it a point to be organized when filing their assets and their business’ profits. It is essential to keep those two things separate, or else you’ll end up spending more than you need to, or you might file something incorrectly.
- Banking: Legal Zoom made a good point in stating that banking will be a challenge once the owner receives their LLC. Checks that are made out for the LLC are not allowed to be cashed. They must be deposited directly to a corporate account. Also, check which bank you would want to bank with for some have higher fees than others for business owners.
So in celebration of this momentous day, go for it – finally get your LLC, start your business, and start building your future dreams!
Content courtesy of Lara Ashley, Founder and Editor of Brenley Magazine, Redefining what it means to be a Southern belle; an online magazine that helps women wear their crowns with grace.
Contributing Author, Lara Ashley
Lara Ashley is a multifaceted Journalist. Lara Ashley obtained her Mass Communications degree at Southern University and A&M College and is obtaining a Master’s degree in Magazine Journalism in the U.K. from Cardiff University. When she’s not watching her fav reality shows (LOVES the Real Housewives franchise), spending her afternoons watching Netflix or with a good book, she’s writing and journaling.