By Gravis Law
What You Need To Do After Forming An LLC
- Obtain Any Necessary Business Licenses and Permits
Many new business owners think that forming an LLC or corporation is the same as getting a business license. Then unfortunately, some realize this isn’t the case when they are fined for operating without a license. Think of it this way: getting an LLC is the first step and creates a legal foundation for the business. A business license gives you the right to operate.
- Get an Employer Identification Number (EIN)
An EIN, also known as a federal tax ID number, is a way for the IRS to identify your business and track its transactions. Think of an EIN like a social security number for companies. If you plan on having employees, an EIN is mandatory. However, getting an EIN is good practice even without employees. That’s because you can give the EIN, instead of your personal social security number to clients and vendors.
- Apply for S Corporation S Treatment (If Applicable)
An LLC has “pass-through” tax treatment, meaning that the business’ profits and losses are passed along and reported on the business owner’s tax return. As the owner of an LLC, you must report all profits (or losses) of the business on a Schedule C with your personal tax return. LLC owners who are active in the business must also pay self-employment tax on the profits.
In some cases, it may benefit you to elect S Corporation status. This enables you to split your business’ profits into salary and distributions. You’ll pay self-employment tax (or Medicare/social security tax) on the salary portion, but not on the distributions. To elect S Corporation status, you need to file form 2553 with the IRS (it’s free) within 75 days since forming the LLC, or 75 days from the start of the current tax year.
- Open a Business Bank Account & Apply for a Business Credit Card
Once you have established your LLC, you can open a business bank account under the LLC. This will allow you to accept checks made out to your business name. In addition, owners of corporations and LLCs are legally obligated to keep their personal and business finances separate – so having a dedicated business bank account is a must. In addition to opening a separate bank account, using a business credit card is a smart idea. By putting all your business expenses on the business card, you’ve got an instant audit trail of your year’s expenses when tax time rolls around. In addition, having a business-specific credit card will help you maintain your “corporate veil”…that’s what protects your personal assets.
- Make a Plan to Keep Your LLC Compliant
Once you become a corporation or LLC, you’ve got to operate your business at a higher administrative level than you’ve been used to as a sole proprietor. Both LLCs and corporations often need to file an annual report with their state, as well as keep up with their quarterly tax payments. Mark these important dates on a calendar ahead of time, or sign up for a service that will automatically send you alerts ahead of key state and federal filing deadlines.
Now for the good news…Gravis Law can help you with all of this. For a consultation with one of our business law attorneys please call 509-380-9102 or visit gravislaw.com to book your consultation today.