Starting an LLC: Where to begin?

Quick question: is it actually legal for LLC founders to loan money back to their own company? If I’ve got this right, interest paid to a corporation counts as a business expense, but paying interest to individuals doesn't—at least not currently—count as taxable income?

Also, is there a cap on how high that interest rate can go?

I’m currently working at a company that will likely shut down around August 1st. Is it possible for me to set up an LLC right now, but hold off on paying into Social Security and Medicare since my current employer covers those until August 1st? Basically, I want to get the business established and ready to go by, say, the fall.

fadedsailor57 said:Quick question: is it actually legal for LLC founders to loan money back to their own company? If I’ve got this right, interest paid to a corporation counts as a business expense, but paying interest to individuals doesn't—at least not currently—count as taxable income?

Also, is there a cap on how high that interest rate can go?

Honestly, just give your LLC interest-free loans... calculating and paying out interest is going to cost you a fortune in taxes. It's better to skip that headache entirely.

goldentrucker22 said:I’m currently working at a company that will likely shut down around August 1st. Is it possible for me to set up an LLC right now, but hold off on paying into Social Security and Medicare since my current employer covers those until August 1st? Basically, I want to get the business established and ready to go by, say, the fall.

You can definitely open it now—you won't have to pay those taxes yourself since your current employer is handling everything through August.
Just a heads-up though—since you'll be the director, make sure that as soon as your old job officially lets you go, you immediately hire yourself through your own company using an employment contract. If you don't, you'll end up paying taxes based on $2622, whereas with an employment contract, you can stick to the minimum wage, 🙂

Carol Price4 said:You can definitely open it now—you won't have to pay those taxes yourself since your current employer is handling everything through August.
Just a heads-up though—since you'll be the director, make sure that as soon as your old job officially lets you go, you immediately hire yourself through your own company using an employment contract. If you don't, you'll end up paying taxes based on $2622, whereas with an employment contract, you can stick to the minimum wage, 🙂

So, if I'm understanding this correctly, I can start a company and just let it sit there without actually running operations, and I won't have any overhead? I'd be the owner with zero employees—is that right? Then, the second I lose my job at my current company, I register myself as the owner and sole employee and sign an employment contract with myself? Sorry to keep bugging everyone, but the more I read about all this, the more confused I get.🙂

Jack Young said:Honestly, just give your LLC interest-free loans... calculating and paying out interest is going to cost you a fortune in taxes. It's better to skip that headache entirely.

I'm actually interested in the ones with interest.

What do you mean by the interest being "too expensive"?

Can you walk me through that?

Here’s my logic: I lend money to my own company, say $33, at a 10% annual interest rate. That means the company pays me $3.25 a year in interest. Since that's an expense for them, it lowers the company's taxable profit, so they pay less corporate tax. Then, as an individual, those $3.25 aren't counted as taxable income for me. Basically, I pulled $3.25 out of the business without paying corporate tax or personal income tax.

Is there a catch? Where's the sting?

fadedsailor57 said:I'm actually interested in the ones with interest.

What do you mean by the interest being "too expensive"?

Can you walk me through that?

Here’s my logic: I lend money to my own company, say $33, at a 10% annual interest rate. That means the company pays me $3.25 a year in interest. Since that's an expense for them, it lowers the company's taxable profit, so they pay less corporate tax. Then, as an individual, those $3.25 aren't counted as taxable income for me. Basically, I pulled $3.25 out of the business without paying corporate tax or personal income tax.

Is there a catch? Where's the sting?

Here's the catch:
(2) An advance withholding tax on interest income under Section 30, Subsection 3 of this Act is paid via withholding at a 40% rate, with no allowance for the personal deductions found in Section 36 of this Act.

goldentrucker22 said:So, if I'm understanding this correctly, I can start a company and just let it sit there without actually running operations, and I won't have any overhead? I'd be the owner with zero employees—is that right? Then, the second I lose my job at my current company, I register myself as the owner and sole employee and sign an employment contract with myself? Sorry to keep bugging everyone, but the more I read about all this, the more confused I get.🙂

Sure, you can open a business and just let it sit idle. Your main costs would be bank fees for the account, whatever you work out with your accountant, and U.S. Chamber of Commerce dues (though those aren't required for certain small setups). Plus, there's rent and utilities if you lease space—but if you just use your home address as your headquarters, you'll just be paying personal income tax to the IRS.
And yeah—once you're let go from your job, you basically hire yourself. Your company enters into an employment contract with you as an individual...

Hey everyone, I know I’m probably throwing this into a sea of a million similar questions—and honestly, I’ve scrolled through plenty of old threads on this—but most of what I see is years out of date. So, I was wondering if it’s actually okay to start an LLC that has absolutely nothing to do with my professional background, especially since I’m already working a full-time job in my specific field? Basically, can you go ahead and set up an LLC while you're still under an employment contract?

Thanks

mistygull17 said:Hey everyone, I know I’m probably throwing this into a sea of a million similar questions—and honestly, I’ve scrolled through plenty of old threads on this—but most of what I see is years out of date. So, I was wondering if it’s actually okay to start an LLC that has absolutely nothing to do with my professional background, especially since I’m already working a full-time job in my specific field? Basically, can you go ahead and set up an LLC while you're still under an employment contract?

Thanks

You sure can! Since you've already got a job, you'd just act as the manager of your own company without being on its payroll. As long as you're working somewhere else, you won't have to worry about paying those extra payroll taxes.

Carol Price4 said:You sure can! Since you've already got a job, you'd just act as the manager of your own company without being on its payroll. As long as you're working somewhere else, you won't have to worry about paying those extra payroll taxes.

So, what you're saying is I can just hang onto my current job and then, you know, kind of mess around with my side hustle whenever I have some downtime?

mistygull17 said:So, what you're saying is I can just hang onto my current job and then, you know, kind of mess around with my side hustle whenever I have some downtime?

Wait—you mentioned an LLC earlier, but now you're talking about a sole proprietorship? What's the actual plan here? I was specifically answering questions regarding LLCs (and those single-member ones too).

Carol Price4 said:Wait—you mentioned an LLC earlier, but now you're talking about a sole proprietorship? What's the actual plan here? I was specifically answering questions regarding LLCs (and those single-member ones too).

I'm thinking about getting a taxi boat and ferrying tourists around during the peak season.

Carol Price4 said:Wait—you mentioned an LLC earlier, but now you're talking about a sole proprietorship? What's the actual plan here? I was specifically answering questions regarding LLCs (and those single-member ones too).

The same logic applies to freelancers who have a regular W-2 job on the side. The only difference is they’ll be handling their own self-employment tax and filing everything based on their annual returns.

Henry Edwards33 said:The same logic applies to freelancers who have a regular W-2 job on the side. The only difference is they’ll be handling their own self-employment tax and filing everything based on their annual returns.

Exactly—that’s why I was asking, since if you're running a small business, you'll still be hit with those self-employment tax bites at the end of the year...

mistygull17 said:I'm thinking about getting a taxi boat and ferrying tourists around during the peak season.

If you want to haul passengers around, I'm pretty sure there are specific regulations regarding the type of vessel you'll need to use...

Hey everyone!
Does anyone happen to have any intel on starting a business while still in college? Is that even a thing you can do? 😕
My vision is to organize student travel packages at prices that actually make sense—you know, way more affordable than those massive corporate travel agencies. I've toyed with the idea of setting up a non-profit association, but from what I understand, those organizations aren't allowed to turn a profit in the traditional sense... any extra cash has to go right back into the association itself. So, I'm really looking into whether forming an LLC or some other type of company might be the better move here (?). Thanks so much in advance!

Hey there.
We run a small business, and we’ve already hit a 45% tax rate in just the first half of the year. We've been kicking around the idea of incorporating as an LLC for a while now, but there's a catch: most of our clients are slow payers. Waiting on those invoices makes covering sales tax payments a massive headache. Is it legally viable for one person to maintain both a sole proprietorship and an LLC simultaneously? Specifically, could we issue invoices for the slow-paying accounts through the LLC—where we'd move our current employees over—while keeping the steady, reliable billing under the sole proprietorship?

I’m currently running my own business alongside my husband; we both serve as directors on the board, though I hold an active executive role while he maintains his career at another company.
My plan is to transfer full ownership to him and then step down from my director position entirely. He would remain on the board, but since he already works elsewhere, he wouldn't be an employee here—effectively, I’d be exiting the company completely.
Does anyone have an idea of what the approximate cost for a transfer like this might look like?

I suspect we’re approaching $1000 a turning point, much like a close friend of mine who practices law mentioned dealing with a situation of this exact nature...