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When to form an LLC

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sonny_1080

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My dad said it’s not worth it to form an LLC until I generate a million in revenue.

I’m a sole proprietor now. I couldn’t come up with a valid argument.

What do you guys think?
 
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biophase

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My dad said it’s not worth it to form an LLC until I generate a million in revenue.

I’m a sole proprietor now. I couldn’t come up with a valid argument.

What do you guys think?
You should form an LLC as soon as it starts to make money and you’ve decided that the business has legs.
 

thechosen1

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Yeah, don’t do what I did (and a lot of noobs do) and set one up before doing anything. It’s pointless.

The reason you incorporate is to shield your business assets from liability.

Well, if you don’t have business assets (worth substantial money)... then... ??? Haha. Grind time > paperwork
 
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alexkuzmov

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My dad said it’s not worth it to form an LLC until I generate a million in revenue.

I’m a sole proprietor now. I couldn’t come up with a valid argument.

What do you guys think?
You need LLC when the business starts making money, or said in another way, after you have some sales.
Before that there is no reason.
Your dad has no idea what hes talking about, 1 million in revenue before legalizing the business? You want to go to jail?
 

originalMJT

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My dad said it’s not worth it to form an LLC until I generate a million in revenue.

I’m a sole proprietor now. I couldn’t come up with a valid argument.

What do you guys think?
If you own a house or car or anything in your name that could be taken away to be sold, I would form a limited comany so you protect your own assets, if the business gets in any trouble they can only take whats the company owns.
 

thechosen1

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If you own a house or car or anything in your name that could be taken away to be sold, I would form a limited comany so you protect your own assets, if the business gets in any trouble they can only take whats the company owns.
Depends. In Texas, your house is your homestead and cannot be touched.

@alexkuzmov not sure what country you are in, but in the USA you do not need an LLC or corporation to “legally do business.” They don’t grant you some magical business license.

of course, some industries do have licenses, like real estate, plumbing, etc. kind of BS.
 
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Deleted85763

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My dad said it’s not worth it to form an LLC until I generate a million in revenue.

I’m a sole proprietor now. I couldn’t come up with a valid argument.

What do you guys think?
You should speak with at least two attornies in your area who specialize in business law and in setting up legal entities like LLC's, corporations, etc.. You want the best form for your specific situation. Many will offer a free initial consultation so there's nothing to lose.

In my persnal experience I knew someone who set up a corporation. They spent a fair amount money, had to do lots of paper work, reporting and annual meetings. Over a number of years that it was in existence the business never had any legal situations where the corporation would have shielded the owner from liability. In fact regardless that a corporation was formed I believe in this case the owner still might be liable because the company was very small. They call it "piercing the veil". So it might have been a waste of time and money to set up that corporation.

Still, speaking with a specialized local attorney is always the best bet before starting a business.
 

sonny_1080

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Robert Kiyosaki talks about LLCs in rich dad poor dad like their the ultimate thing to do because of tax advantages.

Based on the answers received so far it seems like that’s not that important.

The tax stuff that he talks about is the biggest reason I’m thinking about doing it because neither one of my businesses carry much liability from a lawsuit standpoint… and I don’t have much to lose.
 

originalMJT

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Depends. In Texas, your house is your homestead and cannot be touched.

@alexkuzmov not sure what country you are in, but in the USA you do not need an LLC or corporation to “legally do business.” They don’t grant you some magical business license.

of course, some industries do have licenses, like real estate, plumbing, etc. kind of BS.
I think he means earning a million before setting up the LLC and telling the IRS. I'm sure you would be looking at jail time for non payment of tax on a million
 
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sonny_1080

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I think he means earning a million before setting up the LLC and telling the IRS. I'm sure you would be looking at jail time for non payment of tax on a million
No that’s not what He meant. My dad meant being operating as a sole proprietor because here (California) the cost is not worth incorporating until a million is reached.
 

thechosen1

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I think he means earning a million before setting up the LLC and telling the IRS. I'm sure you would be looking at jail time for non payment of tax on a million
Forming LLC =/= telling IRS

The two are not related.
 

originalMJT

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No that’s not what He meant. My dad meant being operating as a sole proprietor because here (California) the cost is not worth incorporating until a million is reached.
I'm not talking about the Dad i'm talking about @alexkuzmov
 
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originalMJT

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Your dad has no idea what hes talking about, 1 million in revenue before legalizing the business? You want to go to jail?
 

Ing

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Here In Germany i d make one as soon as I see my business becoming a business.
I have a business insurance now that my business isn’t one really. But as soon as I had a real business, my private property must be protected of my business riscs!
 

thechosen1

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Robert Kiyosaki talks about LLCs in rich dad poor dad like their the ultimate thing to do because of tax advantages.

Based on the answers received so far it seems like that’s not that important.

The tax stuff that he talks about is the biggest reason I’m thinking about doing it because neither one of my businesses carry much liability from a lawsuit standpoint… and I don’t have much to lose.
Incorporate AFTER you have a real business.

First start making sales.
 
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alexkuzmov

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Depends. In Texas, your house is your homestead and cannot be touched.

@alexkuzmov not sure what country you are in, but in the USA you do not need an LLC or corporation to “legally do business.” They don’t grant you some magical business license.

of course, some industries do have licenses, like real estate, plumbing, etc. kind of BS.
I'm from Bulgaria, eastern Europe.
The laws here are a bit different, yes, but 1 million revenue is far too much for any goverment agency not to take notice.
 

alexkuzmov

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Robert Kiyosaki talks about LLCs in rich dad poor dad like their the ultimate thing to do because of tax advantages.

Based on the answers received so far it seems like that’s not that important.

The tax stuff that he talks about is the biggest reason I’m thinking about doing it because neither one of my businesses carry much liability from a lawsuit standpoint… and I don’t have much to lose.
This is true, you can business expense stuff and you get tax advantages.
HOWEVER thats not a reason to open a LLC, its just a benefit of owning one.
This is what he kind of fails to mention in his rich dad poor dad books.
Without sales you have no business and you cant buy anything to get a tax advantage on.

No that’s not what He meant. My dad meant being operating as a sole proprietor because here (California) the cost is not worth incorporating until a million is reached.
Its hard for me to give advice here since I dont know the law in US.
But if a sole proprietor means a legal entity, that'll might work as well to protect your assets.
 

thechosen1

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I'm from Bulgaria, eastern Europe.
The laws here are a bit different, yes, but 1 million revenue is far too much for any goverment agency not to take notice.
You're misunderstanding me.

I never ever suggested to hide anything from the government.

Here in the USA, you can pay your business taxes WITHOUT EVER HAVING A CORPORATION.

It is called a "sole proprietorship."

It is the default when you do business as an individual. No business, no llc, no corporation required.

Yes, you still pay your taxes...... whether you earn $10,000, $1 million, or $1 BILLION.
 
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alexkuzmov

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You're misunderstanding me.

I never ever suggested to hide anything from the government.

Here in the USA, you can pay your business taxes WITHOUT EVER HAVING A CORPORATION.

It is called a "sole proprietorship."

It is the default when you do business as an individual. No business, no llc, no corporation required.

Yes, you still pay your taxes......
You guys are lucky, lol :D
its easier to do business in the US legally speaking.
 

thechosen1

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You guys are lucky, lol :D
its easier to do business in the US legally speaking.
this is true :)

we complain because there are still hindrances and unnecessary rules, but it's still better than most places...
 
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