What is and what is not a limited liability company (LLC)? An LLC is a creature of state law. With an entity, no matter whether it’s created by a state or you’re creating it through an agreement, you still need to address how it relates to a state, third parties, and the federal government.
- LLC was created under state law; do not exist in federal government
- Definition: LLC is an entity created by state law that mirrors or marries various elements, including creating liability protection for an artificial person
- LLCs create isolation between you and your business; LLCs are similar to corporations
- State: Set up an LLC with the state and pay the state a fee for protection
- State gives you certain types of rights/protection, such as from liabilities of the enterprise
- States give you protection personally from business activities, but some states give you protection from personal activities going into the business
- Third Parties: When dealing with third parties, follow certain formalities – document and maintain books and records of expenses and income for courts and the IRS
- Rule of Thumb: The amount of respect you show your business or LLC, is the amount of respect a third party shows it
- Federal Government: IRS makes sure you pay your taxes and where you go to get an Employer Identification Number (EIN)
- LLC is a separate person, but it’s not recognized by IRS as a separate taxable entity, unless told otherwise
- Three Choices for an LLC: Sole proprietor, partnership, or corporation
Full Episode Transcript:
Toby: Welcome to the Anderson Business Advisors podcast. My name is Toby Mathis. We’re the founding partners at Anderson and we go after the mission: Preserve, Protect, and Prosper, and this podcast is no different.... Read Full Transcript
Toby Mathis, is a founding partner of Anderson Law Group and current manager of Anderson’s Las Vegas office. He has helped Anderson grow its practice from one of business and estate planning to a thriving tax practice and national registered agent service with more than 18,000 clients. In his work as an attorney, he has focused exclusively in areas of small business, taxation, and trusts. In addition, Toby was the past director and host of the longest-running local business radio program on KNUU in Las Vegas “The BOSS Business Brief”. He sits on the board of directors for several companies and was recently appointed to the local board of Entrepreneurs’ Organization, a worldwide association of owners of successful businesses. He has authored more than 100 articles on small business topics and has written several books on good business practices, including first and second editions of Tax-Wise Business Ownership and 12 Steps to Running a Successful Business.