My First LLC

[Christine Brown]

Hello! I'm looking to set up my first LLC and am wondering if there is a reference guide or book or equivalent that will outline the steps to help me set it up correctly and ensure I don't pierce the corporate veil. It would also be great if the resource outlined the best way to "pay myself" (as I know paying myself as an employee with a W2 and such is not the best way to go). A quick note: I'm looking to reinvest most of the profits, but at some point, I'd also like to have some cash flow on my end as well down the line.

Similarly, is there a guide that outlines what can be written off with LLCs? For example, I am renting my current home but can I write off a portion of the rent for my office, which is used for my LLC? What about my car, as I am taking it to evaluate possible investment opportunities, etc. For that example, would it be better to put the car in my business' name and, if so, what do I need to do to also use it for personal use (like school pick up and such). These are just a few of the many questions I have, but I'm hoping there is a general guide to help me get started and better understand it all from a tax perspective. I'm very much a "do the research first, then ask any outstanding questions" kind of person.

[Amanda Breck]

Hello! Setting up an LLC is a great way to protect yourself from liability and implement asset protection and tax strategies.

While you can find inexpensive DIY options out there, I highly recommend working with a competent attorney to help you set up your LLCs. I have reviewed several templates from companies, like LegalZoom, and have found that they often lack the necessary detail and thoroughness required for effective business management. Important sections are frequently omitted, which can create challenges in day-to-day operations and long-term planning. Setting up your LLC right the first time goes a long way in protecting you and your assets, and keeping the corporate veil in tact.

How you set up your LLC, what taxation you choose, and how you pay yourself all depend on the type of business you do and the type of income you generate. If you are setting up an LLC to hold a long term-rental property, for example, disregarded is typically the way to go (taxes are reported on your personal return, you don't have to worry about self-employment tax because the income is passive). If you are doing more active business, like short-term rentals, flips, property management, etc., you might consider a corporate tax structure instead.