Thread: To form a LLC or not?

"amount spent forming LLC" refers to expenses incurred to form LLC, contradistinduished
from LLC investment (aka: capital contribution) to LLC.

$35,000 invested is capital contribution subsequently referred to as capital account, capital share, owners equity.
$ 2,000 FY income 2008, or over multiple FYs? If $2,000 is also tax income, see IRS form 1065 K-1 and K-1 Instructions
Instructions. If LLC multi-member LLC then LLC issues K-1 to members. Single member reports income as
Sole Proprietorship without Form K-1.

Owner(s) capital account reflects increase of $2,000 at FYear-end closing (aka:, owners equity*) if $2,000 is
undistributed to member. Unlike C corporations, LLCs, LPs, LLPs do not have luxury of accumulations prior to
dividend distribution in avoidance of second level of taxation (exceptions apply in technical tax terms).


*multiple factors affect capital accounts other than FY income/loss, example, cash contribution
converted into business equipment is valued according to valuation less depreciation...

I was wondering where was Helse, isn't that something that moves you Helse? LLCs (fun)

Caution: IRS Rule Modification Sep 2008

I believe IRS deduction limit is $5000 in year 1. Amortization required thereafter. Note
distinction between costs attributable to "creation of the partnership and not for
starting or operating the partnership trade or business."

From:
http://www.irs.gov/publications/p535...link1000158849

"For costs paid after October 22, 2004, and before September 9, 2008, you
can elect to deduct a limited amount of business start-up and organizational
costs in the year your active trade or business begins. Any costs not deducted
can be amortized ratably over a 180-month period, beginning with the month
you begin business. If the election is made, you must attach any statement
required by Regulations sections 1.195-1(b), 1.248-1(c), and 1.709-1(c). However,
you can apply the provisions of Temporary Regulations sections 1.195-1T, 1.248-1T,
and 1.709-1T to all business start-up and organizational costs paid or incurred after
October 22, 2004, provided the period of limitations on assessment has not expired
for the year of the election. Otherwise the provisions under Regulations section
1.195-1(b), 1.248-1(c), and 1.709-1(c) will apply."

"Specially in ca where it will cost me $1000+". Oregon LLC is $50 per year. CA requires foriegn
business entities to register if they are "doing business in the state of CA"

"Business" is a term of art. Generally defined as a series of transactions indicating an intent
to locate an operation in a state. Case law indicates the threshold is 8 commercial
transactions per year. You could form an LLC in Oregon for $50 without filing the CA
foriegn corp. documents.


Doing Business in CA Example:
Nevada business sells 4 RVs in CA per year without an office in CA. Not a CA business
Nevada business sells 10 RVs in CA per year with a second CA telephone number. Yes, CA business.
Nevada business contracts with CA business to sell 20 RVs in CA. Not CA business.

*The above notwithstanding, the Nevada business will realize CA source income for purpose
of the CA income tax.

"So theres no real benefit for me to form a[n Oregon LLC for $50]?"

1. Liability protection. Slip and fall, company auto accident, contract liability, worker breaks
arm while performing job you thought was IC but Workers Comp board reclassified as Employee. LLC
interests afford protection in BK Court, Tax Court, divorce and child custody/alimony/support cases.

2. Establish Federal TIN, D&B listing, Telephone Directory, Bank Account, etc.

3. Taxation. LLCs may be structured to eliminate S.E.T. via IRC sec. 1402(a)(13) "income only DNI".

4. Sole Proprietors are limited in certain business deductions.
Post Box, Uniform expenses are limited to "unwearable clothing: see clown suits and fireman wear rule. An LLC
may purchase a "uniform" (golf shirts from LL Bean) with a cool company logo, pants, shoes, belts (to hold
your business cell phone*), laundry services, eye protection (Oakley), tools, mileage, fuel, eating
allowances...

Step 4 is an aggressive approach to illuminate to potential for income reduction via LLC vs. Sole Prop


*Tax laws are not consistent with "business" definitions relating to foriegn corps.