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View Full Version : Is LLC for me?



Tommy Castro
09-30-2012, 03:36 PM
Hello Everyone, I'm new and this is my first post, thanks in advance for the advice...

Me and my fiance are starting a bath & body boutique in New Jersey. Im trying to save $$ and not hire an attorney to setup my legalities of the business. (Is it recommended to hire an attorney or is it possible for me to handle it myself?)
The business is currently ran out of our home, but we plan on opening a brick and mortar store next year.
We are not married yet, and I am the one putting up the funds to startup. She will be the working manager/owner.
I have decided to register this business entity as an LLC..
If an LLC. is the best choice, how do you recommend setup? Should I list my fiance as a member? Should I list our my name and my home address as the the "Registered agent/address"?
For tax purposes is it more beneficial to list me, my fiance or both in the LLC? I work full time as a commissioned salesperson, and my fiance will eventually leaving her job to work the new store full time.

Thanks

Evan
09-30-2012, 04:40 PM
If you're going to be doing business with someone you're in a relationship with, I highly recommend not taking short cuts and getting the involvement of an attorney to draft the appropriate agreements. While everything is going well with you now, if things go sour (not saying they will, but IF) you will want to make sure that this is structured properly. Certainly there are some "out of the box" software packages to prepare this paperwork, and it will get you there. But you should take some caution to ensure it is set up properly.

With that said, if you plan to split profits 50/50, and you're contributing 100% of the initial equity, you'd need to have this as either an LLC or partnership. An S-Corp would require you to make equal contributions, even if that was $1 each, though you could potentially "loan" the business the remainder.

But a lot of your questions go beyond the typical "which structure is better" and are very specific to your arrangement. There are no "best" arrangements, but I think these will be great matters to discuss when you consult with an attorney.

Tommy Castro
09-30-2012, 05:02 PM
How would it effect me if I only put myself on the LLC?

Freelancier
09-30-2012, 05:19 PM
A one-person LLC is a disregarded entity from the IRS' perspective (all profits and losses flow to your tax return) and a liability sheild from the state's perspective. It's similar to an S-Corp for the most part, but an S-Corp has its own tax return and the profits from the company would flow to your tax return from there.

You want the liability shield, no doubt, just because someone somewhere will have an allergy to something you sell. You also want general liability insurance to cover the LLC and yourself (talk to your insurance agent about everything that can go wrong to see what I mean).

Setting up an LLC in Jersey, like in many states, is as simple as filing online forms on your state's Secretary of State's portal (https://www.state.nj.us/cgi-bin/treasury/revenue/dcr/filing/page1.cgi). No attorney needed, although you may want to consult one to help you determine if that is the right structure for you. Setting up a corporation is often more complex, so getting an attorney is in your best interest.

Even if you go the one-person LLC route and don't consult an attorney, you should definitely spend a couple of hours (costing about $400) with a small business accountant to make sure you have all your financial ducks in a row and so that you can start the financial planning process (what to do with losses, what to dowith excess profits, how to pay yourselves, etc.).

Evan
09-30-2012, 08:54 PM
I assure you that if you're planning to get your fiance involved, they will probably want some ownership (potentially), and you should have a clear operating agreement in that case which spells things out.

formanllc
10-01-2012, 10:33 AM
I would only make 1 of you on the LLC just to make sure you protect yourself and your personal assets. An LLC is probably the best route for you.

Business Attorney
10-03-2012, 10:01 AM
Even if you only "put yourself on the LLC" there may be questions about your fiance's rights and role in the business. And, as Evan said, she will probably want some ownership eventually if she is the one running the business. It is much better and usually much cheaper in the long run to address the legal issues upfront and come up with a workable structure.

Penny wise, pound foolish.