_ Yours Non-Technically: LLC

Showing posts with label LLC. Show all posts

Friday, October 27, 2017

Annual Report Filing and Types & Stages of Dissolving your LLC with Wyoming Secretary of State

How to file the annual report on the Wyoming Secretary of State website

In order to remain compliant with business filing regulations, you will need to file an 'annual report' for your LLC. The report can be automatically generated using the Wyoming Secretary of State website and submitted within a few minutes. This post explains the steps to complete this task.

Access your online account with the Wyoming Secretary of State website either

via a link that carries you directly to your 'Detail' page pictured immediately below. (Your registered agents and or the Wyoming Secretary of State may provide this direct link) -- or --
from the site's index page, select 'business e-filing' (from the top menu), 'annual report filing' (in the left column menu), 'Get started' button, Enter your 'filing ID'. Then click 'next' (to arrive on the 'verify' page).

Make the following selections

If the previous step places you on the 'Detail page:

‘file your annual report’ (in the top right corner)
‘Get started’

‘Next’ (in the ‘verify’ page which provides basic company information like company name and so on)
If necessary, change the ‘mailing address’ then click ‘next’

NB. The mailing address can be anywhere (including non-US locations). However, the mailing address will be public. Consequently, if you want this information to be private, you can use the address of your Wyoming registered agent.

Next
In the ‘filing fees’ page, enter any relevant figures
Click ‘next’ on the confirm page
Continue through the signature and payment pages.

Types & Stages of Dissolving your LLC

What happens if you completely missed your filing date? There are 2 ways in which you may dissolve an LLC.

Soft & progressive-to-final dissolution. This way allows the LLC to become dissolved over a period of time if you stopped filing any (further) annual reports.
Immediate final dissolution. (not discussed in this post). This way involves actively filing to officially dissolve the LLC. This takes immediate effect.

The former, which I describe as 'soft and progressive-to-final dissolution' occurs over a period during which the status of your LLC’s account changes through progressively more advanced stages of dissolution until completion as follows.

You have a submission deadline (example 1st November yearly if you first created the LLC during the month of November). Your registered agents will usually notify you by email of this deadline as it approaches and after it passes.
After this first deadline, you can file the annual report to re-instate the LLC with no fees (ie other than the usual annual report filing fee) within a 60-day grace period during which a notification will be sent to your mailing address.
After the aforementioned grace period ends, the status of the LLC will be changed to a 60-day 'inactive' phase. You can file the annual report to re-instate the LLC but with a USD 50 reinstatement fee (ie in addition to the usual annual report filing fee of USD 50).
After the aforementioned period, you will be granted a 2-year grace period during which the LLC can still be claimed by you (in a pre-emptive rights fashion). You can file the annual report to re-instate the LLC with a USD 50 fees (ie in addition to the usual annual report filing fee also of USD 50 for all of fiscal periods / years missed).
The LLC will be finally and completely dissolved and no longer available for you to reinstate.

CONTENT RELATED TO FILING AN ANNUAL REPORT TO THE WYOMING SECRETARY OF STATE

How to complete your Wyoming resale tax return
Completing federal tax return as a single member limited liability company (SMLLC)
Just to keep everything organized, keep a record of your past annual reports and other related docs in your Google Drive. Create a bookmark and forget it until the deadline notifications arrive in following year.
Remember to advise your registered agents of your physical address, especially if their address is listed as your mailing address.

Tuesday, February 7, 2017

Single-Member LLC Tax Return

Previously, I gave a broad overview of the US limited liability company / LLC business structure, along with its advantages and disadvantages. This post offers an overview of the income tax process associated with single-member LLCs (aka SMLLCs). This post may be particularly useful for LLC drop shippers.

As the owner of a US-based single-member take the following steps

submit the LLC's net income or loss on a Schedule C when submitting your personal individual tax return form to the Internal Revenue Service (IRS).
Use a separate schedule C form per business. Example, if you have 3 businesses, use 3 schedule C forms
Use a schedule SE form IF your (combined) schedule C net profit exceeds USD 400 for a year, a schedule SE (one schedule SE will apply to all schedule C forms).
Must have an employer identification number / EIN if you must file excise tax returns and or have employees. You may get an EIN free of cost, even if you do not need one. This is sometimes an attractive option for the sake of privacy and the ability to use the EIN in lieu of the personal SSN. Enter the EIN on the form C

In the case of most US states, the primary address of the business must be a street address (NOT a PO box address). That street address may be that of your registered agent (aka resident agent) or, if privacy is not your concern, even your home address. NB. Banking for the LLC should be separate from your personal banking.
Observe the same filing due dates and extensions on due dates that apply for individuals and sole proprietorships
Regarding setup expenses. As the owner of a single-member LLC, you can NOT currently include setup expenses (aka 'organizational expenses') as 'business operating expenses' on the schedule C of your tax return.
Taxes payable & deductions redeemable are as follows.

Self Employment tax (aka FICA) payable has a rate of apx 13% on the first USD 100,000 of your LLC's net income
Medicare tax payable has a rate of 2.9% on all net income
Deduction redeemable on your regular federal income tax return equals 50% of all self employment tax payable

Example: Net income: $70,000

Less all SE taxes (@ 15%): $10,500Redeemable Deductions (@ 50% of all SE tax) = $5,250

RELATED ARTICLES

Business Structure - LLC Legal Setup

Deciding on the business structure of your entrepreneurial pursuit is another important decision. Here are some options. They are best considered by comparing and contrasting the 1) liability protection (as it relates to protection of personal assets and entity requirements) and 2) Taxation (as it relates to profit taxation and profit distribution.

About an LLC

is a flow-through entity (FTE), ie its income "flows through" it (or distributed) to investors or owners. From a taxation perspective, this means that such income is treated as the income of the investors or owners. In this regard, it is like a sole proprietorship or partnership. Beware however because some places like the District of Columbia does not recognize LLCs as FTEs, thereby subjecting members to double taxation. Typically, LLCs will respond by choosing to be taxed as a partnership to avoid double taxation.
Income Taxes Process:

For a single-member owner, the owner reports the LLC's net income or loss on Schedule C of his or her personal individual tax return. Details of filing taxes as a single-member LLC.
For multiple owners, the owners act as they would in a partnership, ie they report income and loss on IRS Form 1065. (Like partnerships, each member also get a Form K-1 that reports his or her distributive share of the LLC's income or loss as a basis for reporting on that member's individual income tax return)

Tax Benefit: LLCs incur lower taxes because, unlike corporations, they are not subject to double taxation
Offers limited liability to owners (at least in theory). Note the importance of having an operating agreement that helps in clarifying this matter, especially in jurisdictions were default rules offer weak protection. To enforce this, you must keep your finances separate from those of the LLC.
combines limited liability of a corporation and FTE of a sole proprietorship without being either
does need to comply with hefty list of corporate regulations (like reporting IF the owner keeps all records separate)
does not need to have a board of directors
is practiced in many countries (including the US, UK and UAE) with country-specific variations
Although not always required, may involve an operating agreement. The operating agreement governs members' financial and managerial rights, powers, allocated tax responsibilities, distributions of profit, entitlements and duties. Without one, a default state rules apply. Essentially, it is comparable with a corporation's by-laws or a partnership agreement. It is even noteworthy for single-member LLCs where it is a declaration of the chosen structure and can sometimes be used to prove in court that the LLC structure is separate from the individual owner. It is therefore necessary for owners to have documentation to prove that (s)he is indeed separate from the entity.
If you are neither a citizen nor alien resident of the US, you will need a 'registered agent' which is a legal contact for your company.

Advantages

Flexibility regarding choice of tax regime. An LLC can elect to be taxed as a sole proprietor, partnership, S corporation or C corporation
It is worth considering an S-LLC. An S-LLC is a modification of the LLC. Specifically, it allows the LLC to pay taxes like a S corp, as it relates to not paying 100% on all self-employment tax.
Unlike an S corporation, an LLC can allocate its members' share of income, gain, loss, deduction, or credit in virtually any way, even other than the ownership percentage of each member
Limited liability from some or all liability for acts and debts of the LLC, depending on state shield laws. See above, there are exceptions. When compared with S corporations, it is easier for the average small LLC owner to maintain limited liability simply because they do not run the risk of eroding liability by not fulfilling all of the corporate requirements. For clarification, most small S corporation owners fail to meet all of the hefty requirements and, by so doing, erode the limited liability benefit of having a corporation.
Unlike an S corporation, an LLC may have an unlimited number of members and there are no restrictions regarding the citizenship of the members.
Much less administrative paperwork and record keeping than a corporation.
If it elected to be taxed as a flow through entity (and not as a C corporation), there is no double taxation
For real estate companies, each separate property can be owned by its own, individual LLC, thereby shielding not only the owners, but their other properties from cross-liability.

Disadvantages

Owners can encounter difficulties if they do not have an operating agreement with the 'Governance and Protective Provisions'. For instance, state rules may become the default. However, state rules are not as well developed as corporations and can there there offer limited protection for owners.
Several jurisdictions levy a fee called 'franchise tax' (aka 'capital values tax', '(business) margin tax' or 'minimum tax fee') on LLCs as a means of charging multi-member LLCs for the privilege of limited liability. Relative to taxes, it is 'low'. For instance, in California, it is USD 800 yearly. This franchise tax applies for multi-member LLCs.
Owners pay taxes on 100% non-passive income, (ie versus only on their chosen salary from an S corporation)
Several fees may apply

Renewal fees generally apply
In some states, there may be publication requirements upon formation. Members of the LLC publish a notice in newspapers in the geographic region that the LLC will be located that it is being formed. This cost is sometimes significant as in major metropolitan areas.

Taxing jurisdictions outside the US are likely to treat a US LLC as a corporation, regardless of its treatment for US tax purposes—for example a US LLC doing business outside the US or as a resident of a foreign jurisdiction. This is very likely where the country (such as Canada) does not recognize LLCs as an authorized form of business entity in that country.
The principals of LLCs use many different titles—e.g., member, manager, managing member, managing director, chief executive officer, president, and partner. As such, it can be difficult to determine who actually has the authority to enter into a contract on the LLC's behalf. A possible workaround is to rank the authority of members.
It may be more difficult to raise financial capital than for a corporate form with strict rules regarding the flow of funds.

-- --

RELATED ARTICLES