What Is an LLC?

What is and what is not a limited liability company (LLC)? An LLC is a creature of state law. With an entity, no matter whether it’s created by a state or you’re creating it through an agreement, you still need to address how it relates to a state, third parties, and the federal government.

Highlights/Topics:

• LLC was created under state law; do not exist in federal government
• Definition: LLC is an entity created by state law that mirrors or marries various elements, including creating liability protection for an artificial person
• LLCs create isolation between you and your business; LLCs are similar to corporations
• State: Set up an LLC with the state and pay the state a fee for protection
• State gives you certain types of rights/protection, such as from liabilities of the enterprise
• States give you protection personally from business activities, but some states give you protection from personal activities going into the business
• Third Parties: When dealing with third parties, follow certain formalities - document and maintain books and records of expenses and income for courts and the IRS
• Rule of Thumb: The amount of respect you show your business or LLC, is the amount of respect a third party shows it
• Federal Government: IRS makes sure you pay your taxes and where you go to get an Employer Identification Number (EIN)
• LLC is a separate person, but it’s not recognized by IRS as a separate taxable entity, unless told otherwise
• Three Choices for an LLC: Sole proprietor, partnership, or corporation

Resources

EIN

1120 or 1120S

1244 Stock Loss

Toby Mathis

Anderson Advisors

Tax and Asset Protection Event