Many people learn that the LLC business entity is a fairly recent phenomenon are surprised. In 1977 Wyoming the first state law was the creation of LLCs. Most states did not jump on the LLC bandwagon until 1988 when a pass through entity for tax purposes as classified by the IRS LLC. This ruling has resulted in LLCs are popular monster they are today. Now every state legislation allowing the creation of LLCs and California is no different.
What are the advantages to an LLC?
LLC business unit offers many advantages for small businesses.Unlike a corporation, there are far fewer corporate formalities. Instead of setting up payroll, you can draw from the unit. You do not need to maintain a balance sheet, it is recommended. In short, LLC entity is all about flexibility.
Form a California LLC for my business?
Can be. While LLCs offer significant flexibility for small businesses, California charges an LLC tax that can really cramp your profits. Their gross revenues as an LLC on the "privilege of doing business in California" are charged for. You are lucky. Depending on your situation, an "S" corporation, formed in California may be a better choice.
Additional Tax Issues
California allows a person to own an LLC. This causes problems is a tax perspective. IRS accept the existence of LLCs owned by one person really does not. IRS position that a partnership of two people you think should be in the form of taxes. Accordingly, this single-owner LLCs as sole proprietorships that behavior. The problem with the result that you end up self - employment tax payments.
While LLC structures provide significant flexibility, the structure is always the best option for a small business. Make sure you are capable of forming an LLC for your business with the lawyer before you talk.
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