Starting an LLC: Where to begin?

Hey everyone

I’ve got a bit of a situation on my hands regarding setting up an LLC and getting sorted with Social Security registration

So basically, I’m launching a trading company using some incentives from the IRS, and I just finished filing all the paperwork for Social Security and healthcare today. Since I’m getting $8000 from the IRS to cover my salary and taxes, and since I’m going to be the only employee at the company, I decided to be extra careful—so I called the IRS info lines, the Social Security Administration, Fine, and even the Department of Labor just to double-check if there’s any reason I couldn't hire myself as an IT engineer (which pretty much fits what the company does, and the tax folks said it was totally fine) at a gross pay of $1000. The thing is, I won't have any actual revenue coming in for the first few months while I wait for clients to pay up, but once things pick up, I can start paying myself a higher salary.

But then, total bummer moment—I just got home and realized that the lady at the Social Security office actually scribbled "Director" next to my job title on the application form.

Is she actually allowed to do that when my official employment contract says something completely different? I'm asking because I heard a rumor that if they label me as Director, I might end up having to pay contributions based on a base of roughly $77,556.00 net, instead of the amount I actually put in my contract and wrote on the Social Security application.

I'm really wondering which one carries more weight here—like, am I going to be taxed based on my actual employment contract, or based on that "Board Member/Director" title she added?

Also, can an LLC function if there's an employee who is technically the founder and the director, but where the director role itself doesn't necessarily require them to be an "employee"?

Back to the same question again. Under Section 18 of the Social Security Act, a company director has to be covered by insurance, which basically means they have to be an employee either at their own firm or somewhere else. So, you can't just hold a directorship without also being an employee; the only way around that is if someone else fills that role under the conditions I just mentioned.

briskgull61 said:Back to the same question again. Under Section 18 of the Social Security Act, a company director has to be covered by insurance, which basically means they have to be an employee either at their own firm or somewhere else. So, you can't just hold a directorship without also being an employee; the only way around that is if someone else fills that role under the conditions I just mentioned.

Look, I totally get that there has to be some kind of employment status or insurance coverage involved,
but what I'm really getting at is whether the law actually stops me from holding the director role as my main function while technically being hired under a different job title that doesn't say "director" on it, you know?
Just to make it super clear, if we're looking at what she actually does and how she operates, if a small business only has one single employee, that person is essentially forced to be listed under the director position to make everything legal.

I just don't quite wrap my head around why the folks over at the other help desks were giving me such different advice than this.

Just because one employee holds a certain level of influence doesn't mean they're automatically sitting in the director's chair.

From what I gather—and I’ve actually checked in with a few consultants 😁

ambercobra25 said:Look, I totally get that there has to be some kind of employment status or insurance coverage involved,
but what I'm really getting at is whether the law actually stops me from holding the director role as my main function while technically being hired under a different job title that doesn't say "director" on it, you know?
Just to make it super clear, if we're looking at what she actually does and how she operates, if a small business only has one single employee, that person is essentially forced to be listed under the director position to make everything legal.

I just don't quite wrap my head around why the folks over at the other help desks were giving me such different advice than this.

What Lili is saying is spot on. The Board Member—the Director—is appointed by the company's shareholders, and you need that individual to act as the legal representative for the business. That person doesn't necessarily have to be a full-time employee; the company can hire "n" number of other people separately.
If you are an actual employee of "your own" company and you have a standard employment contract, then you'll be paying your payroll taxes based on whatever amount is listed in that contract.

Hello everyone! I’m a bit of a newcomer here, just finding my footing on the forum. To be honest, I’ve been spending quite a bit of time scrolling through these boards ever since I found myself out of work. For a long time, I was part of a small, private contracting firm specializing in home renovations, but unfortunately, things didn't pan out and the business folded. Now that I have some breathing room, I've been reflecting on my next steps and am seriously considering starting something of my own. Since I can see there are many experienced professionals here who truly understand the nuances of this industry, I was hoping I might lean on you for a little guidance. My goal is to continue working in small-scale construction or perhaps transition into a "handyman" role, as I’m quite comfortable handling various interior tasks—everything from painting and drywall to tiling and electrical work. However, I don't hold any specific trade licenses or formal certifications at the moment. Is there a way for me to perform these services legally? I'm looking into the idea of becoming self-employed, where I'd essentially wear both the "owner" and "employee" hats for the time being. Any advice would be so greatly appreciated!

You might want to head down to the unemployment office and talk to your caseworker about putting together a business plan to apply for self-employment grants. It might be your smartest move to set up a sole proprietorship, since you can get an 18% $167 discount on your payroll taxes. Of course, that all depends on whether they actually approve your business plan and what you intend to do.
You should probably register the business as a contractor for construction services, home renovations, or something along those lines.
If you check the U.S. Chamber of Commerce website, you can find a list of which construction trades qualify as small businesses, so it’s best to look there for specifics regarding that field.

As for setting up an LLC or a corporation with $3.25 capital, I honestly don't know much about that side of things; other people on this forum who have gone that route will know the details better than I do. Personally, though, I suspect a sole proprietorship is better for you from a tax and payroll contribution standpoint than an LLC.

Greetings. I find myself posing a somewhat peculiar inquiry... I am in the process of establishing an LLC for an e-commerce venture, yet I am feeling rather uncertain regarding which address to officially register. My own legal residence is situated in an entirely different state, while my husband is registered in our current state but at a separate location altogether. We happen to be living in a rental property where we aren't technically on the lease, though this is precisely where I intend to conduct my business operations. I suppose, if one were to consider the various bureaucratic implications, what would be the most prudent course of action here?

Hey everyone! I’ve been chewing on a question lately regarding how to actually get a small organization off the ground. Is it better to set up a non-profit club, a formal association, or maybe just go the LLC route? It’s a bit of a unique situation because, 😉 I’m currently working a steady job, 🙂 whereas my friend isn't employed at the moment. We’ve been taking these painting classes together and getting really into all sorts of creative projects—she even does some sewing on the side. Now, we aren't looking to set up a sidewalk stand or anything like that, but we really need a sort of... well, a legal "safety net," so to speak. Something that lets us sell our pieces without constantly looking over our shoulders. Does anyone here have any insight on this? 😕 Thanks in advance! 🙂

There’s a lot going on regarding LLCs here, and I can't keep up with all the threads. If anyone feels like helping me out, how long does the whole process actually take to set up an LLC? I mean from the moment I file everything through CNN until I'm actually cleared to start doing business?
Also, if the company isn't active for a while—say there's just no work coming in—do you still have to cover taxes and other obligations for the director or the business itself?

Hey everyone,
I’d appreciate a response as soon as possible if anyone happens to have some insight here. Basically, an IT firm based out of San Francisco is looking to open up a satellite office in New York to house a handful of employees—though their main headquarters will stay put in San Francisco. What are the absolute bare minimum obligations and steps they need to take to get this running? Thanks in advance.

driftingtinker4 said:Hey everyone,
I’d appreciate a response as soon as possible if anyone happens to have some insight here. Basically, an IT firm based out of San Francisco is looking to open up a satellite office in New York to house a handful of employees—though their main headquarters will stay put in San Francisco. What are the absolute bare minimum obligations and steps they need to take to get this running? Thanks in advance.

They could set up a branch office. That involves deciding on a representative, registering it with the court registry, and all that—but honestly, why bother?
The easiest way is just to find some office space to rent, hire the staff, and call it a day. Since you're doing IT work, you won't even have MIT breathing down your neck. If you actually need to handle sales tax or invoicing from that D.C. location, just sort out the technical side of things and move on.

Hello, I have a few questions...
I remember reading somewhere on this forum that you can technically loan seed capital to a business after it's officially registered and then pay it back later. Is that actually true, and if so, does the IRS take a cut or require any specific filings?
To be specific: my plan is to personally loan the funds to the entity (either to myself or my husband) just to get things moving until we're up and running.
The business likely won't see any profit for at least a year, so I’d be lending money to the company as needed. We won't have any employees at the start either; it'll just be me putting in the hours as director. Currently, I have a full-time job elsewhere, but I'm out on maternity leave right now. Can I serve as a director while still having social security contributions being paid through my other employer, or will the government treat me like a retiree and block me from holding that position?

From what I’ve gathered so far, I suppose you really need to have at least one employee on board (regardless of who they may be).

wanderingranger41 said:Hello, I have a few questions...
I remember reading somewhere on this forum that you can technically loan seed capital to a business after it's officially registered and then pay it back later. Is that actually true, and if so, does the IRS take a cut or require any specific filings?
To be specific: my plan is to personally loan the funds to the entity (either to myself or my husband) just to get things moving until we're up and running.
The business likely won't see any profit for at least a year, so I’d be lending money to the company as needed. We won't have any employees at the start either; it'll just be me putting in the hours as director. Currently, I have a full-time job elsewhere, but I'm out on maternity leave right now. Can I serve as a director while still having social security contributions being paid through my other employer, or will the government treat me like a retiree and block me from holding that position?

That’s not quite right. Your initial capital is meant for things like paying vendors and keeping the lights on—it's definitely not a personal piggy bank to draw from later.

wanderingranger41 said:Hello, I have a few questions...
I remember reading somewhere on this forum that you can technically loan seed capital to a business after it's officially registered and then pay it back later. Is that actually true, and if so, does the IRS take a cut or require any specific filings?
To be specific: my plan is to personally loan the funds to the entity (either to myself or my husband) just to get things moving until we're up and running.
The business likely won't see any profit for at least a year, so I’d be lending money to the company as needed. We won't have any employees at the start either; it'll just be me putting in the hours as director. Currently, I have a full-time job elsewhere, but I'm out on maternity leave right now. Can I serve as a director while still having social security contributions being paid through my other employer, or will the government treat me like a retiree and block me from holding that position?

You can totally give the company interest-free loans, and once the business starts bringing in cash, you can pay those loans back. As for the role, you can absolutely be the director without hiring a single employee.

Jack Young said:That’s not quite right. Your initial capital is meant for things like paying vendors and keeping the lights on—it's definitely not a personal piggy bank to draw from later.

You can totally give the company interest-free loans, and once the business starts bringing in cash, you can pay those loans back. As for the role, you can absolutely be the director without hiring a single employee.

Alright, so just tell me one thing—who is actually going to issue the invoices if there aren't any employees? Because, as far as I know, only an employee can handle invoicing.

Justin Jones12 said:Alright, so just tell me one thing—who is actually going to issue the invoices if there aren't any employees? Because, as far as I know, only an employee can handle invoicing.

I’d be an employee, but my payroll taxes are already being handled by another company...

As for the startup capital, you're wrong. There is nothing stating I can't pay myself a salary from those funds starting in month one—though I'd have to cover the taxes. I can use that initial capital however I see fit. My question is whether I have to pay tax on it when I'm paying back a loan, and if so, how much.

In those first few months, the company won't be making huge profits or seeing massive expenses, but I need the legitimacy. When I walk into a meeting with a client, I need to be able to say "I am an official representative of this firm," rather than just some random person showing up...

Justin Jones12 said:Alright, so just tell me one thing—who is actually going to issue the invoices if there aren't any employees? Because, as far as I know, only an employee can handle invoicing.

The owner handles the billing—and if you're worried about tax compliance, they'll just use the company's EIN under the operator ID.

Carol Price4 said:The owner handles the billing—and if you're worried about tax compliance, they'll just use the company's EIN under the operator ID.

Hmm... I guess I wonder if that actually holds up legally.

Justin Jones12 said:Hmm... I guess I wonder if that actually holds up legally.

Sure thing—they could even just use their own Social Security number, pay the processing fees, report it as miscellaneous income, and call it a day.

Or, an accountant could just issue the invoice under the client's name while using their own business EIN—no big deal at all. 🙂