Starting an LLC: Where to begin?

You’ve got the math all tangled up here.
If you actually hire someone at a company, you're looking at a salary cost of roughly $1100, plus you have to factor in a 20% corporate tax rate 😉

restlesstiger47 said:Hey there,
I'm looking into starting my own business. I'm estimating my annual revenue will be around $130 $0.00, with expenses sitting at about $71 $0.00 (keep in mind this doesn't include payroll or taxes
).
If I’ve got my math right, here is how the tax situation looks:

12 months x $583(health and medicare insurance) = $21 $0.00
Sales Tax 23% = $4500
Corporate Income Tax at 14% (leaving me with 24 $0.00 net) = $1120
That leaves me with a clean $21 $200 minus whatever I pay my accountant
If I set up as a sole proprietorship under the sales tax system, would everything stay the same except for that income tax rate (14%), or am I missing some other variable in the mix?

So here's my take! I'll add a disclaimer though, because I could totally be wrong... feel free to set me straight. You really learn so much on these forums, someone always has that deep experience or just the perfect bit of advice to share...🧐

Let's say the company has two employees. Payroll costs might hit about $2667 per month for the business, leaving the actual net pay at roughly $1733 total for both workers. So, we're looking at an annual payroll cost of 96 $0.00 for the whole company.🙂

Then you've got those various obligaciones known as oblik namet: things like U.S. Chamber of Commerce fees, memberships, an accountant ($400 monthly), corporate income tax ($600 annually), property taxes ($83 and $100) for the municipality and the county, local business unit taxes, some miscellaneous rents, trash services for the office, and fixed utility fees for water and electricity that you pay even if you don't use anything... plus, a tiny slice of revenue (just under 1%) goes to the U.S. Forest Service based on final statements. There are other specific levies depending on what you do, too—like ZAMP fees or a PBS subscription—and local stuff like historic district fees. Retailers and restaurants also deal with a 3% sales tax on gross revenue, so every industry has its own little extra burden to carry...😂

On top of all that, since the revenue is over 85 $0.00, you're automatically in the VAT system (23%). You'll be paying a 20% corporate income tax. Basically, you deduct your input invoices from your output invoices (which must include that 23% VAT), and then you pay the difference to the government. If there’s anything left after all those costs, you subtract another 20% for the income tax...

Just eyeballing it, I'd say a company with two employees needs at least $67 in annual revenue just to stay minimally profitable (assuming you own your space or have "low rent") while running a normal operation and meeting all your obligations...

p.s. regarding your example, if it's just you working for a minimum wage, you might barely break even. In my opinion, you'd actually need more revenue than $43 to make it work...

My bad, I realized I got the math wrong—corporate tax is actually 20%, not 14%.🙂
How am I supposed to count payroll costs $1100?? It feels like half of it just goes straight to the IRS, while the rest stays in my pocket, right?$583

Is there any way I could act as the director of my own company but hire a student through an internship agreement to avoid those extra payroll taxes?

How much would the government hit me with in penalties if I skip out on employer contributions during the startup phase? I’d rather wait until things stabilize before paying up.

@Donna Jones26—I don't even have separate utility bills for this. I was thinking about just registering the business at my apartment.

restlesstiger47 said:My bad, I realized I got the math wrong—corporate tax is actually 20%, not 14%.🙂
How am I supposed to count payroll costs $1100?? It feels like half of it just goes straight to the IRS, while the rest stays in my pocket, right?$583

Is there any way I could act as the director of my own company but hire a student through an internship agreement to avoid those extra payroll taxes?

How much would the government hit me with in penalties if I skip out on employer contributions during the startup phase? I’d rather wait until things stabilize before paying up.

@Donna Jones26—I don't even have separate utility bills for this. I was thinking about just registering the business at my apartment.

Look, I was being general about the expenses here. I didn't mean you'd face every single one of them! Costs vary wildly depending on what you do, but in my opinion, there's just way too much "red tape" and overhead imposed by the government and various regulations just because you decided to set up an LLC...☕

The total cost of an employee for a corporation (LLC) is basically what they take home (net in their pocket) plus all those employer-side taxes and contributions that make up the gross salary. That gross amount is the actual monthly hit to the company (I gave an example of the gross for two employees $2667 and from that, the workers get $1733). It seems like Lili P. was right when she said the absolute minimum labor cost for a firm is $1100 (with the net being around $767, if I recall correctly).

A company CEO has to be an official employee, though not necessarily of their own firm. You could have someone else act as the director who already has a job elsewhere, and then you'd just be an authorized signatory. But honestly? I wouldn't go looking for a student intern just to save on taxes. You really need to be upfront about meeting all your legal obligations from day one, or just don't bother starting the business at all...

It’s a bit of a balancing act trying to stay on top of my bills when I’m working with just 20 $0.00. Right now, about 10 $0.00 is tied up in inventory, another 5,000 goes straight into the website, and there's just a tiny bit left over for ads. It isn't that I'm dodging my responsibilities; I just need to push things back a couple of months. Starting a business is like trying to get a heavy flywheel spinning—it's always the hardest part at the beginning.

restlesstiger47 said:It’s a bit of a balancing act trying to stay on top of my bills when I’m working with just 20 $0.00. Right now, about 10 $0.00 is tied up in inventory, another 5,000 goes straight into the website, and there's just a tiny bit left over for ads. It isn't that I'm dodging my responsibilities; I just need to push things back a couple of months. Starting a business is like trying to get a heavy flywheel spinning—it's always the hardest part at the beginning.

To set up an LLC, you need $25,000 in initial capital, and filing costs usually run between $4,000 and $1667, assuming you guys knew that already. You can technically use assets worth $6.75 as your capital, but honestly, just depositing cash is way easier once the business actually gets moving.

It’s really not that big of a deal to wait 2 or 3 months. Sometimes people just pay everything at once after a few months... but from what I know about how this works, if you stay on top of your payroll taxes and social security every single month, it ends up being cheaper.
Apparently, if you wait and pay for 2 or 3 months all at once, they hit you with tax penalties—maybe some small interest too—which you might get some of back at the end of the year.

Anyway, it’s not exactly the smartest move, but if you don't strictly need the cash (meaning you have enough to live on), you could skip paying yourself a salary for the first 5 or 6 months. For example, if the gross is $3,300, maybe only $2,300 is net or minimum wage. That money would just pile up in the employee payroll account... I'm just not sure if once the business stabilizes and collections improve, you can pull those funds out without messing with your personal bank account. But I do know some people have done exactly that to weather a period of illiquidity when they couldn't collect payments from customers fast enough.

Awesome, thanks so much for all the help! 🙂

I’m planning to give HP Inc. a call tomorrow. If I can work out some decent shipping rates with them, I'm officially diving into the business side of things. 🙂

I could use a little guidance here—here’s the situation:

There is a chance I'll have to change my employment setup with my current employer (an overseas firm);

basically, I would need to set up my own LLC instead of being an employee. I'd bill them monthly for services like marketing or market brokerage, totaling my current gross salary plus some extras, like car expenses or home office rent...

On the commercial side, I wouldn't be handling imports, procurement, or sales to third parties; it would just be one or two invoices sent abroad for my professional services.

Let's say we're looking at $4,000 a month. That puts me well over the threshold for mandatory sales tax registration, but I don't see how that actually hits me. Does sales tax apply to those $4,000 payments?

I know I'd account for office rent and utilities, but I'd essentially pay myself a minimum owner's draw, cover my accountant and standard payroll taxes, and then potentially pull out additional funds via business expense reimbursements. Anything left over stays in the business account until the end of the fiscal year, at which point it's distributed as a dividend subject to a 20% tax.

Does this plan hold water, 🙂 or am I missing something obvious?

Dear Forum Members,

I have two specific questions regarding business formation. I am planning to establish an LLC that will remain inactive initially while I get certain projects off the ground. My first inquiry concerns the overhead costs associated with maintaining an inactive company. Secondly, is there a legal requirement to hire staff, or if I am the sole employee, am I still obligated to pay social security, healthcare, and other payroll taxes? It is worth noting that I am already employed elsewhere, where my employer handles all my tax contributions.

I appreciate any insights you can provide.

P.S. I am also looking for a reliable accounting firm; please feel free to reach out if you offer professional bookkeeping services.

Quick question:
I started my business back in 2009.
But starting this month, I’m finally getting ready to file everything and kick off my actual shipments.
For the last year and a half, I’ve been busy picking up tools and supplies at Home Depot while I was getting my product dialed in.
So, here's the deal:
How far back can I actually go when submitting those Home Depot receipts for my tools and materials?

Thanks!

Joseph Foster81 said:Dear Forum Members,

I have two specific questions regarding business formation. I am planning to establish an LLC that will remain inactive initially while I get certain projects off the ground. My first inquiry concerns the overhead costs associated with maintaining an inactive company. Secondly, is there a legal requirement to hire staff, or if I am the sole employee, am I still obligated to pay social security, healthcare, and other payroll taxes? It is worth noting that I am already employed elsewhere, where my employer handles all my tax contributions.

I appreciate any insights you can provide.

P.S. I am also looking for a reliable accounting firm; please feel free to reach out if you offer professional bookkeeping services.

- typical costs =$18 U.S. Chamber of Commerce membership fees and basic bank service charges
- you aren't required to have employees. Also, if you're already employed elsewhere, you can't be dual-enrolled for benefits under both employers.

Hey there!
I’ve got a bit of an unusual question for you all. Is it theoretically possible to start an LLC that covers basically everything? I mean, could I register my business to handle, say, 50 different types of activities right from the jump? I realize some industries naturally conflict with one another, making it impossible to pick everything, but is there any rule against just listing dozens of different service categories? Also, does the filing fee go up $50 for every single activity added (I’ve heard a rumor that each extra category comes with its own $50 cost)? On another note, can a company officially have zero employees while still having "staff" made up of, say, 50 volunteers? How does that actually work from a legal and accounting standpoint? Would I need to sign specific contracts with them to make it legitimate...

The price stays exactly the same, regardless of how many business activities you list.

I'd say you only start seeing extra charges if you decide to tack on additional services later down the line.

Hey there,

So, here’s the deal. A buddy and I are looking at launching a business next year—basically a full-service cleaning and landscaping outfit, both inside and out. It’ll just be the two of us to start, though who knows where we'll be in a few years. Since we’re planning to register the business under a pretty broad category of services, I wanted to see if there's any wiggle room regarding the bookkeeping. Specifically, if we register under accounting services, could my wife handle all the books for us? She’s got the degree and some extra certifications, so it seems like a solid way to save some cash—professional accountants can get pretty pricey. Also, quick question about the setup: if we launch this together, does one of us have to officially be the CEO? If that’s the case, it would probably be him, since I’m planning to stick with my current 9-to-5 for a bit until we build up a steady client base. If we’re both founders, but he’s the only one listed as the director—meaning I wouldn't be "on the payroll" until things really pick up—would he just be paying his own payroll taxes and social security? I'm honestly a little fuzzy on how that logistics side works. Thanks in advance for the help! Cheers

vividbadger71 said:Hey there,

So, here’s the deal. A buddy and I are looking at launching a business next year—basically a full-service cleaning and landscaping outfit, both inside and out. It’ll just be the two of us to start, though who knows where we'll be in a few years. Since we’re planning to register the business under a pretty broad category of services, I wanted to see if there's any wiggle room regarding the bookkeeping. Specifically, if we register under accounting services, could my wife handle all the books for us? She’s got the degree and some extra certifications, so it seems like a solid way to save some cash—professional accountants can get pretty pricey. Also, quick question about the setup: if we launch this together, does one of us have to officially be the CEO? If that’s the case, it would probably be him, since I’m planning to stick with my current 9-to-5 for a bit until we build up a steady client base. If we’re both founders, but he’s the only one listed as the director—meaning I wouldn't be "on the payroll" until things really pick up—would he just be paying his own payroll taxes and social security? I'm honestly a little fuzzy on how that logistics side works. Thanks in advance for the help! Cheers

To have internal bookkeeping, you don't need to be registered as an accounting firm; you just need to employ an accountant. As for the CEO situation, the company can list a responsible officer or director in its official filings, provided they are technically employed somewhere. Whether they are employed by your specific company or working elsewhere doesn't matter. However, if they aren't officially "employed" in a way that qualifies for standard benefits/contributions, they'd have to pay those high self-employment taxes, which usually isn't worth the hassle. Furthermore, the person listed as the director in the corporate registry doesn't strictly have to hold a dedicated position within your firm; they can be employed in another role for which they are qualified, as long as they are actually performing that work.

http://www.usa.gov/business

Kimberly Harris6 said:To have internal bookkeeping, you don't need to be registered as an accounting firm; you just need to employ an accountant. As for the CEO situation, the company can list a responsible officer or director in its official filings, provided they are technically employed somewhere. Whether they are employed by your specific company or working elsewhere doesn't matter. However, if they aren't officially "employed" in a way that qualifies for standard benefits/contributions, they'd have to pay those high self-employment taxes, which usually isn't worth the hassle. Furthermore, the person listed as the director in the corporate registry doesn't strictly have to hold a dedicated position within your firm; they can be employed in another role for which they are qualified, as long as they are actually performing that work.

http://www.usa.gov/business

Thanks a ton for clearing that up. So, since I'm already on the payroll, it would probably make the most sense for me to step in as the director. My wife is an accountant, too—so could she be hired by the company to legally handle nothing but our internal bookkeeping? Thanks again!

I’m looking for some solid recommendations—does anyone happen to know which notary public in the greater New York City area offers the most reasonable rates for setting up an LLC? 🙂

Take a stroll down Main Street. Back when we were looking into setting up our LLC, word on the street was they had the lowest prices in town. Since they didn't give us an actual business name, just check if there's a whole strip of them or just one lone shop.

Thanks!

Quoting:

hudicek says:
Hey everyone,
"I have two questions. I'm planning to set up an LLC that will essentially sit dormant until some business actually picks up. My first question is: what are the overhead costs for a company that isn't active yet? Second, am I required to hire employees, or if I'm the sole owner, can I avoid paying payroll taxes and health insurance premiums since I'm already covered under my current full-time job elsewhere?"

Thanks in advance for any help.

P.S. I'm also looking for a bookkeeper, so if you run a firm and handle accounting, feel free to reach out.
- standard business expenses =$18 U.S. Chamber of Commerce membership fees and bank service charges
- a company doesn't need employees, and if you're already employed elsewhere, you can't be double-enrolled for benefits.""

Best regards to all!

I could use some guidance here.
I currently have a steady full-time job, but I’ve gone ahead and incorporated an LLC, much like hudicek did. The business will focus on automotive accessories (basically retail)
Here is what I'm wondering...

1. Is it legal to hold down a regular full-time job while running my own company on the side? Or am I restricted to just one employer?

2. Let's say the company stays inactive for a while. No employees on the books. Then, a small opportunity pops up—say, I want to sell five quarts of motor oil to someone. What happens then? Am I forced to officially hire a staff member, or can I just step in as the director and handle it myself?

Thanks for the help!