Starting an LLC: Where to begin?

I lack significant experience in entrepreneurship, though I intend to acquire 🙂
I am currently evaluating an online retail venture specializing in baby gear. A few questions arise: does anyone here have experience in a similar niche? Furthermore, is establishing an LLC mandatory, or is there a more cost-effective legal structure available? My objective is to launch this operation with minimal capital investment and as little bureaucratic friction as possible.

jadepanther46 said:I lack significant experience in entrepreneurship, though I intend to acquire 🙂
I am currently evaluating an online retail venture specializing in baby gear. A few questions arise: does anyone here have experience in a similar niche? Furthermore, is establishing an LLC mandatory, or is there a more cost-effective legal structure available? My objective is to launch this operation with minimal capital investment and as little bureaucratic friction as possible.

Find someone who already owns a brick-and-mortar shop. You handle all their online sales, and they give you a discount or a cut of the profits.

So, I know an LLC doesn't strictly need a designated director, which got me thinking... is that actually doable if the owner is currently unemployed? Like, if they aren't tied down to some other company or job?
In that scenario, if there's no director on record—and if I’m reading this right—there shouldn't be any payroll taxes or social security contributions owed for the owner, since they're just the founder and a member of the administration acting on their own authority, rather than being a formal director... right??

Where are you getting the idea that you don't need a director (an authorized person)? 🤷
You don't necessarily need staff, but you absolutely have to have an authorized person on record...
Also, why are you conflating the owner with the director? Those are two completely different roles... (even if one person happens to do both)

Yeah, I’ve definitely come across companies that—at least on their official paperwork—don't even list a director. 🤷

The founder, who also sits on the administration, is the one ultimately pulling the strings for the business. At the end of the day, a company can function just fine without a formal director or even a single employee on the payroll.

Alex Watson21 said:So, I know an LLC doesn't strictly need a designated director, which got me thinking... is that actually doable if the owner is currently unemployed? Like, if they aren't tied down to some other company or job?
In that scenario, if there's no director on record—and if I’m reading this right—there shouldn't be any payroll taxes or social security contributions owed for the owner, since they're just the founder and a member of the administration acting on their own authority, rather than being a formal director... right??

But what else is a managing member who acts independently and individually if not a director?

The only thing you can really do is stay "inactive" for the first few months. For instance, you could register the LLC in February but not officially report the start of business operations until July. You should definitely run this by an accountant. In our case, we stayed inactive for those first six months. To be specific, we issued a handful of invoices—maybe ten, though for pretty significant amounts—and had a few incoming expenses. Our accountant didn't even want to charge us for those initial months.

Henry Edwards33 said:The founder, who also sits on the administration, is the one ultimately pulling the strings for the business. At the end of the day, a company can function just fine without a formal director or even a single employee on the payroll.

I’m not sure I follow your logic there. Unless there's some specific loophole in the tax code I'm unaware of, I think you might be mistaken.

If there are multiple owners, at least one has to step up as the director or a member of the administration. The only catch is if they're already employed elsewhere; in that case, they wouldn't qualify as an employee of their own firm.

The other partners can simply act as members of the board, which means they don't need to have any employment status at all.

Henry Edwards33 said:My partner and I founded this company together. We both sit on the administration board with an equal 50:50 split. We don't have a director, we don't have any employees, and one of us is currently unemployed. As far as business operations go, we aren't having any issues.😉

Being a member of the administration doesn't strictly mean you have to be the Director, though you certainly can hold that role.

The concept of a "dormant" company isn't really a thing anymore. It’s just a company that happens to be doing very little activity.

You might want to double-check that. We were explicitly told that someone had to be designated as the director—not just for the notary, but for FedEx and our accountant as well.

It’s not exactly a "dormant" status; more like waiting for the IRS to notice you once your transaction volume creeps past whatever threshold they tolerate.

Until then, nobody actually needs to be on the payroll. Once the numbers start showing up in the statistics, that's when an unemployed director has to be officially registered. Alternatively, you could be a member of the assembly while being the sole director, and since you're already employed elsewhere, you wouldn't be paying additional payroll taxes.

An administration member doesn't necessarily have to be the CEO. There are plenty of companies out there running just fine without one at the helm...

Alex Watson21 said:An administration member doesn't necessarily have to be the CEO. There are plenty of companies out there running just fine without one at the helm...

An officer who acts as the sole legal representative for the company—that’s effectively the director. I actually went back and checked the articles of incorporation to verify that.

Can someone give me just one example of an LLC operating without a director? I’ve truly never encountered one. Even when foreign investors set up entities here just to hold assets, like a private yacht, they still have to step up as directors.

Personally, I work with plenty of small businesses that don't even have a single employee, yet every single one of them has a director.

I haven't heard anything about it either, which is why this whole thing feels so off... I just don't get why the Secretary of State's office would use two different terms for the exact same thing 🤷

Alex Watson21 said:I haven't heard anything about it either, which is why this whole thing feels so off... I just don't get why the Secretary of State's office would use two different terms for the exact same thing 🤷

Even when I check the online business registry, it doesn't explicitly list me as "Director." Instead, it states that I am a member of the board with the authority to represent the company individually and independently. It’s one of those odd discrepancies where the official digital filings say one thing, yet all the actual paperwork insists I hold the title of Director. Is it really that complicated?
One co-owner doesn't show up anywhere—well, not by name, since they’re sitting on the board—but they’re busy drafting the fundamental framework, that whole "social contract" bit.

Is it possible for the founders to be listed as both general members of the company and as part of the executive board?

At the end of the day, I don't think you can have a corporation without a director. Someone has to be held accountable. Who else would it be?

Henry Edwards33 said:In your situation, is this person who isn't actually working paying any payroll taxes? If so, how much?
I'm asking because you don't have a director or any employees on the books. Thanks!😉

Zero taxes are being paid. And honestly, we aren't an outlier here; I could probably name ten different companies operating under this exact same setup.

I’m curious—assuming Aurora is right, what happens if a company simply doesn't have the cash flow to hire a director or cover their salary?

Henry Edwards33 said:Zero taxes are being paid. And honestly, we aren't an outlier here; I could probably name ten different companies operating under this exact same setup.

I’m curious—assuming Aurora is right, what happens if a company simply doesn't have the cash flow to hire a director or cover their salary?

Here is how it was explained to me, following the advice of notary publics, accountants, and colleagues alike;

When you first incorporate, you have to designate a director. Since there were two of us starting out, the notary told us that someone must hold the director title, though we had the option (but weren't required) to both serve in that capacity. In my company, I am the sole director. It’s the same thing when you go to open a business account at a bank like Chase; they demand a copy of the director's ID and their signature. They don't bother asking about the other partners.😁

If the Secretary of State's website lists you as a "Member of the Board" who represents the company individually and independently—that essentially makes you the director.
If the director is an employee, or if the company hasn't officially kicked off its "actual operations" yet (as I mentioned above regarding dormancy), no one is strictly required to be an employee of the firm.

However, if the director is unemployed and the company is active (once operations begin, there isn't really a way to go back to being dormant), they are required to pay their own payroll taxes. They can waive their salary due to the company's poor financial state, but those taxes still have to be covered.

Now, it isn't mandatory for that director to be insured specifically as a director. That is to say, they don't necessarily have to sign an employment contract with the firm for a directorial role. They can technically create another job title within the company and sign the contract on both sides 🙂.
For example, an administrator. You’d pay payroll taxes based on a net of roughly $0.83 around $0.45.

If the director has no money for taxes and isn't working anywhere else, I suspect there aren't many options left.

In your specific situation, it might be best for your colleague to be a member of the board while you act as the director. Problem solved. It's certainly cheaper than dealing with all those tax obligations.

We’re both on the board, and honestly, nobody—not the notary, not IBM, not even our bank—ever asked us to appoint a single director. It was simply recorded that we both have independent signing authority, and the bank has copies of both our IDs on file...

I’d love an explanation for this phrase "with actual work," because I’ve certainly never encountered it before in any professional setting. 🤷
Our business operations are running smoothly and we aren't behind on any taxes or payroll, and under US law, a founder is perfectly entitled to volunteer their time at their own company.

Henry Edwards33 said:We’re both on the board, and honestly, nobody—not the notary, not IBM, not even our bank—ever asked us to appoint a single director. It was simply recorded that we both have independent signing authority, and the bank has copies of both our IDs on file...

I’d love an explanation for this phrase "with actual work," because I’ve certainly never encountered it before in any professional setting. 🤷
Our business operations are running smoothly and we aren't behind on any taxes or payroll, and under US law, a founder is perfectly entitled to volunteer their time at their own company.

If you are both on the board and have the authority to represent the company individually and independently, then by definition, you are both CEOs. You should check your operating agreement; that's the only place where that distinction is officially made.

That term is essentially a threshold of tolerance for startups. It’s that grace period before your accountant registers you with the IRS and starts filing your official statistics. In my experience, things were tolerated right up until that day, but certainly not after.

Honestly, your best bet is to just ask your accountant. No one is going to volunteer the information if you don't ask, but if an inspector shows up out of the blue, they'll be more than happy to hand you a fine.

No one is stopping you from volunteering your time for your own company, but the law does prohibit a CEO from being unemployed.

According to the IRS, you register for taxes the moment you start up, using the date on your official articles of incorporation as the starting point.
Once the business is live, you're expected to file your quarterly reports right after each quarter ends.

Terms like "grace periods" or "minimal operations"—honestly, I’ve never heard anyone actually use those terms, so they still sound like total gibberish to me. And then there's the whole debate about whether the CEO has to be an actual employee; people have written so much about it that I've just completely checked out.

You're right, though. Ignorance isn't an excuse.

Henry Edwards33 said:According to the IRS, you register for taxes the moment you start up, using the date on your official articles of incorporation as the starting point.
Once the business is live, you're expected to file your quarterly reports right after each quarter ends.

Terms like "grace periods" or "minimal operations"—honestly, I’ve never heard anyone actually use those terms, so they still sound like total gibberish to me. And then there's the whole debate about whether the CEO has to be an actual employee; people have written so much about it that I've just completely checked out.

You're right, though. Ignorance isn't an excuse.

Look, we’re talking about some internal database that the old accountant—who happens to be a total pro, by the way—is familiar with.
I asked her if it was possible, and she said yes; apparently, there isn't an immediate requirement to report everything instantly, blah blah blah. But then, she also noted that once the registration is filed, I have to start paying payroll taxes immediately. Every contact I've reached out to at the local IRS office seems to follow that same protocol.

So, I swung by the notary's office today to sort out my business registration stuff. Turns out, things got a bit messy because of some legal shifts a couple of months back. That old national classification system we’ve been using since 2007? Yeah, it's basically dead. Now, these notaries have to follow specific guidelines handed down from the commercial courts—guidelines that are strictly internal. You won't find them floating around on Google or anywhere else online. Total mystery, right?
"Per Article 51 of the Judicial Register Act, any business activities being registered must align with specific federal statutes. If there isn't a specific law governing a particular activity , then it gets logged based on the entity's own filing and official documents, provided the business isn't prohibited by law, doesn't violate public morality, and isn't tied to government agencies, public officials, political parties, or other legally restricted entities."