Starting an LLC: Where to begin?

nimblepuma47 said:Does anyone actually know—because I’ve searched everywhere and come up empty—what the actual costs are for switching from a sole proprietorship to an LLC? Do you seriously have to sell off all your business assets to the LLC and get hit with both sales and purchase taxes—like some people on this forum are claiming—or is there a more "elegant" way to handle it?

A sole proprietorship is just an individual, whereas an LLC is a legal entity. As far as I understand, there isn't really a "conversion" process; you simply transfer the assets from one party to another, likely through a sale as you mentioned earlier.
Sales tax should be neutral for you regardless, assuming you're even registered for it—you'll need to weigh whether it's worth it based on your annual revenue. Which taxes were you referring to specifically? Real estate, vehicles...

nimblepuma47 said:Does anyone actually know—because I’ve searched everywhere and come up empty—what the actual costs are for switching from a sole proprietorship to an LLC? Do you seriously have to sell off all your business assets to the LLC and get hit with both sales and purchase taxes—like some people on this forum are claiming—or is there a more "elegant" way to handle it?

If the business is set up on a cash basis, you basically have to close out the books just like you would when shutting down entirely, which means paying the tax man.
However, if you're operating on an accrual basis, the process is much smoother, especially if you utilize certain provisions from General Dynamics. You don't even need to file anything with the Commercial Court as a capital increase; it really just comes down to getting the agreement notarized.

Thomas Ortiz3 said:A sole proprietorship is just an individual, whereas an LLC is a legal entity. As far as I understand, there isn't really a "conversion" process; you simply transfer the assets from one party to another, likely through a sale as you mentioned earlier.
Sales tax should be neutral for you regardless, assuming you're even registered for it—you'll need to weigh whether it's worth it based on your annual revenue. Which taxes were you referring to specifically? Real estate, vehicles...

That’s exactly what I meant—property and vehicles.

There are a ton of moving parts here. If you start out as a sole proprietor, you're paying based on income—but if the business scales and starts hitting those high tax brackets, you can actually request a switch to a corporate tax structure in the next fiscal year. At that point, your tax rates look much more like what a standard LLC or Corporation would pay.
When you make that jump from individual income to corporate taxation, you have to draw up an opening balance sheet and handle all the associated paperwork—VAT filings, adjustments, and so on.
The same goes for converting a sole proprietorship into a full-blown corporation; the math changes depending on whether you were previously taxed on income or profit.
There are several different scenarios regarding how much you’ll owe and how to settle the tax bill when these transitions happen.
It isn't just one rulebook, either. You've got federal tax laws, state property taxes, luxury vehicle taxes, and a whole mess of other regulations to navigate. You really have to look at the big picture.
As Raymond Martinez10 pointed out in earlier posts, you can't ignore the shift in legal liability—or the long-term goal of eventually selling the company.
We could go in circles on this all day, but to get any actual, useful advice, you'd need to provide a lot more specific data.

Is it actually possible for a company's headquarters to be located on land that the corporation itself owns?
I realize how incredibly obvious that might sound, but I suppose it’s worth exploring every single possibility just in case.

Carol Ward3 said:Is it actually possible for a company's headquarters to be located on land that the corporation itself owns?
I realize how incredibly obvious that might sound, but I suppose it’s worth exploring every single possibility just in case.

HEADQUARTERS

headquarters of a trading company

Section 37.

(1) The headquarters of a trading company is the location where the management is situated and where business is directed, or the place where the company conducts its operations, as specified in the articles of incorporation or the company bylaws.

(2) A trading company may have only one headquarters.

(3) The headquarters of a trading company shall be recorded in the commercial register.

(4) If the management of a trading company is located in a place different from the headquarters registered in the commercial register, or if the company carries out its activities in a different location, the registered headquarters remains the legal seat; however, third parties may rely on the actual location of management or operations regarding legal consequences depending on the seat...

It’s hard to manage a corporation from an empty field, though you might technically conduct business there.
My take is "why not," but it really depends on the specifics. If you have a farm where you actually operate, that acreage could serve as the corporate seat. But if we're talking about some neglected plot of dirt, a judge might find that harder to swallow during a legal dispute...

Thanks, that was a pretty clear breakdown, though I suspect we might still have to look into some alternative routes 😉

On another note: if a foreign national decides to set up a business here in the States—acting as both the owner and the director—are they required to hold a specific business permit? The company wouldn't be running any massive operations, so the director would likely only be visiting the US occasionally whenever things actually need attention, rather than being based here full-time.

Carol Ward3 said:Thanks, that was a pretty clear breakdown, though I suspect we might still have to look into some alternative routes 😉

On another note: if a foreign national decides to set up a business here in the States—acting as both the owner and the director—are they required to hold a specific business permit? The company wouldn't be running any massive operations, so the director would likely only be visiting the US occasionally whenever things actually need attention, rather than being based here full-time.

No, they don't.
If they are just flying in for meetings, closing deals, or similar tasks while actually living and working abroad, there's no requirement...
However, if they aren't covered by insurance overseas and intend to actually live and work within the States, then naturally, a work permit becomes necessary.

Is it actually true that if you run things as a sole proprietorship and open a bakery to sell sweets, you’re legally required to have a certified pastry chef on staff? But then, if you register it as a formal corporation instead, anyone can bake whatever they want regardless of their credentials?

analogtrucker15 said:Is it actually true that if you run things as a sole proprietorship and open a bakery to sell sweets, you’re legally required to have a certified pastry chef on staff? But then, if you register it as a formal corporation instead, anyone can bake whatever they want regardless of their credentials?

In theory, sure, you could pull that off—provided nobody asks any questions. A small business wouldn't even be able to get its initial permits without a certified professional on the books, but should an inspector ever decide to drop by, you'd be facing some massive fines, since a corporation is expected to actually know its own regulatory requirements...

analogtrucker15 said:Is it actually true that if you run things as a sole proprietorship and open a bakery to sell sweets, you’re legally required to have a certified pastry chef on staff? But then, if you register it as a formal corporation instead, anyone can bake whatever they want regardless of their credentials?

That is true, though it’s a bit more nuanced than that. Essentially, when operating as a small sole proprietorship, regulations often require you to have a staff member who holds specific vocational certifications for that trade. However, if you are operating under a larger corporate structure, the focus shifts; it isn't strictly about having a degree in pastry arts. As long as your "baker"—or whoever is handling the production—possesses a valid food handler's permit and meets all the necessary health department requirements and sanitation standards, the law doesn't care if their actual professional background is in something completely unrelated, like being an auto mechanic, for example.

What kind of fees are we looking at for various amendments, like adding new business activities or appointing a new CEO?

Also, how does someone who isn't the director actually get the authority to sign off on invoices, tax filings, and other official forms? Is there a standard contract template used for notary authentication? What’s the cost for that kind of change? And does that person have to be an actual employee of the company?

Joshua Howard said:What kind of fees are we looking at for various amendments, like adding new business activities or appointing a new CEO?

Also, how does someone who isn't the director actually get the authority to sign off on invoices, tax filings, and other official forms? Is there a standard contract template used for notary authentication? What’s the cost for that kind of change? And does that person have to be an actual employee of the company?

That’s exactly what I’m trying to figure out. If I recall correctly, was it free during the initial incorporation process, only to later charge based on $50 per business category—or am I just pulling that information out of thin air? Does anyone here actually have the facts?

Does sending out a pro forma invoice to get an advance payment on a larger total trigger a tax liability?
Absolutely, if you’re issuing that pro forma before the service has actually been rendered.
The standard IRS guidelines usually talk about invoices, but I'm a little fuzzy on whether a pro forma falls under that same umbrella.
(5) Once an official invoice is issued, the tax obligation kicks in right then and there, regardless of how much you've billed or whether the work is even finished yet.

Over on CNN, there’s a form for reserving a business name ()—but it doesn't say where I actually need to take it! Do I hand it in to the local agency or go straight to the clerk's office? Also, since I have to attach the payment receipts, will they accept a printed confirmation from my online banking app—or do I really need an official stamped receipt from the bank or the Treasury?

Thanks so much!

mistyfox2 said:Does sending out a pro forma invoice to get an advance payment on a larger total trigger a tax liability?
Absolutely, if you’re issuing that pro forma before the service has actually been rendered.
The standard IRS guidelines usually talk about invoices, but I'm a little fuzzy on whether a pro forma falls under that same umbrella.
(5) Once an official invoice is issued, the tax obligation kicks in right then and there, regardless of how much you've billed or whether the work is even finished yet.

No, there’s no tax liability just from issuing a pro forma. It happens the moment that advance payment hits your bank account. At that point, you need to issue a formal invoice for the deposit, including sales tax. Then, once you finally deliver the product or complete the service, you simply void that initial deposit invoice and issue the final one.

Ashley Ortiz3 said:Over on CNN, there’s a form for reserving a business name ()—but it doesn't say where I actually need to take it! Do I hand it in to the local agency or go straight to the clerk's office? Also, since I have to attach the payment receipts, will they accept a printed confirmation from my online banking app—or do I really need an official stamped receipt from the bank or the Treasury?

Thanks so much!

The easiest thing to do is just check the Secretary of State website and search for the name you want. If it’s already taken, you won't be able to use it. I think you have to turn that form in to the tax office along with the original receipts. I'm not totally sure about using an online banking printout, because when I started my company, I just went into the bank and made a cash deposit directly into the account.

Ronald Palmer13 said:The easiest thing to do is just check the Secretary of State website and search for the name you want. If it’s already taken, you won't be able to use it. I think you have to turn that form in to the tax office along with the original receipts. I'm not totally sure about using an online banking printout, because when I started my company, I just went into the bank and made a cash deposit directly into the account.

I get what you mean, but it’s more than just a reservation—it’s basically getting official permission to use that name, right? They'll reject the filing if the name doesn't play by our state laws. In my opinion, there shouldn't be any reason they'd turn down the name I picked, but I'd rather just file the paperwork and pay the $3.25 fee now just to be safe—better to be certain the name is approved than to have my articles of organization rejected and waste a few days waiting, don't you think?
As for the rest of your question; are you talking about depositing the initial startup capital or those $3.25 fees for the name reservation?

Hey everyone.
I’m looking at getting a little side hustle off the ground.
So, here’s the deal: I’m torn between starting a brand-new LLC from scratch or just buying up an existing small business that’s been sitting dormant for a few years—one that doesn't have any outstanding debts or legal headaches hanging over it.

Which route do you think makes it easier to land a loan? I’m looking for some seed money in the ballpark of 100 $0.00, which, let's be real, I don't have sitting in my savings right now.
Obviously, I’d hit up the bank with a solid business plan and all the necessary paperwork.
My big question is: in this current economy, do banks even bother helping out small entrepreneurs who don't have a massive track record of revenue yet?

Thanks for listening.

Is it actually doable for someone who’s currently out of work to start their own business and then just sign up for part-time status? If that's an option, does anyone have a clue what the tax and social security contributions would look like?

thanks!