This episode is brought to you by my new FREE Masterclass, "The Most Common Legal and Tax Mistake at Each Stage of Business and How to Avoid Them." In this Masterclass you will learn if it's time to go from a sole proprietorship to an LLC, an LLC to a S-Corp, and how to properly run an S-Corp. You'll learn how to get more profitable in a snap and put your taxes on auto-pilot as well as how to manage the growth of your business without fear or IRS hate mail or lawsuits. Click here to sign up for the Masterclass.
This week on Facebook Live I answered the following questions:
1. Researching domestication of my client’s LLC from one state to another and discovered their LLC expired in January. Can they still switch states if it’s expired, or will they have to renew it first? They asked if they should just apply for the LLC in their new state and dismiss the old one but wouldn’t that cause problems with the payments received since January not going to their current tax ID? - submitted by Jenna L
From a tax perspective, if this person is an LLC it doesn't matter because it's a pass-through entity. We may put in our EIN when we pay taxes but usually we're just putting in our SSN and ultimately it doesn't matter. When we file our tax return our business income gets included on our personal tax return so at the end of the day, the IRS will say you owe $X. What business you make it under does not matter until you owe business-level taxes which doesn't happen until we have C4s.
From a legal perspective, look at the LLC from a cost perspective. If they are even able to get their old LLC reactivated, there's probably a fee with that. If domestication is available in both states they will pay to domesticate into the new state and then dissolve it in the old state. Depending on how many fees are associated with the old state, it may be better to start fresh in the new state.
Stay on top of your compliance.
2. If you have an S-Corp, and you’re sued, what can they take from you? - submitted by Johanne M
An S-Corp is a tax status so you either have an LLC or a corporation as an underlying entity. Unless they are able to pierce your corporate veil, they won't be able to go after your personal assets, only your corporate ones.
You want to have your legal layers of protection in place.
3. Will general liability insurance cover a florist doing a workshop with beginners who injure themselves (cut themselves or slip and fall)? - submitted by Trish R
We would expect this to be covered but you will want to ask your insurance provider because it comes down to what you got your insurance for.
4. If I already have insurance on my own LLC and want to start a partnership with someone, do I need separate insurance for that business as well? - submitted by Laurie H
Yes. We never recommend general partnerships. Any time you're going into business with a partner, you want to form a new LLC with its own bank account, insurance policy, etc.
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In case you missed it, I did a 3 part Boot Camp on Quarterly Taxes and how to get started saving. Click here to start listening to Part 1 of the Boot Camp.
Have a follow up questions or want to meet some fellow kickass biz owners who also are trying to get their shit legit? Come be a bestie and join us in the Facebook Group.
You'll learn: what the three mistakes are; how to fix them; and also how to work with me to get your legal & tax shit legit.