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An LLC (or limited liability company) is popular among business owners because of the versatility that often comes with the LLC business structure. LLC owners typically have less formalities imposed on their business than other entity structures. If the LLC does not make the S Corp election, default tax rules mean LLC members must pay self-employment tax. If the LLC makes the S Corp election, working LLC members are treated as employees and their wages are subject to employment taxes. The LLC business structure is often recommended for smaller organizations.
Check out this article to learn how an LLC is taxed.
Often a sole proprietor means someone who operates a business but reports the income on their individual taxes and doesn’t have a separate legal entity. LLCs are a legal entity that can provide personal liability protection, even if still owned by a single person. In other words, it can protect the owner’s personal assets from certain business debts or liabilities. Sole proprietors and single member LLCs are taxed in the same way, unless another tax structure (like an S Corp) is elected.
Filing for an LLC can be very simple. Depending on the state you file in, you just need to file the appropriate formation documents with the Secretary of State’s office in the state. To do this with Block Advisors, you’ll need to choose a business name. You’ll also need an EIN, and to obtain that, you’ll need your social security number, individual taxpayer ID, or EIN of the responsible party, the business name, and business address. You may also have an operating agreement, especially if you have more than one LLC member, which documents all the rules and responsibilities of the members.
Once the LLC is registered and you have your EIN, there are some ongoing business formalities you’ll need to take care of, and those vary by state. For example, you’ll want to make sure you separate your business and personal financials if you haven’t already. That means separate bank accounts at minimum. Your tax filing requirements will depend on how you elect to structure your business (either as a sole proprietor, S Corp, or partnership).
An EIN is an employer identification number and is needed in certain situations. For example, partnerships and corporations are required to have an EIN. Sole proprietorships and LLCs that have employees, pay excise tax, or contribute to a retirement plan also need an EIN. EINs are included with all of our packages.
Block Advisors pricing for business formation starts at $149, which includes state formation, basic documentation, and an EIN. State filing fees are charged separately in addition to our fees and vary from state to state. If you have a question about a specific state, feel free to contact us at 877-472-1095. In addition, there will likely be other costs associated with starting your business, such as opening bank accounts, additional accounting or tax preparation fees, insurance, or obtaining a business license.