Create Your Personal Invoice Example for Security Effortlessly

Personal invoice example for Security

hi everyone I'm attorney Aiden Durham with 180 Loco in Colorado welcome back to all up in your business where today I'm going to tell you about six pretty common mistakes that you're going to want to avoid if you are forming or already operating as a single member LLC but first of course please do subscribe if you haven't already be sure to click that little bell so you get notified anytime I post a new video and you can check the description for links to some additional information and resources and while I am a lawyer I am not your lawyer the stuff I talk about in my videos isn't a substitute for actual legal advice if you need help with any legal matter you should consult with a lawyer who's licensed in your state now before I get into what these mistakes that you're going to want to avoid are let's talk about like why are they mistakes what's going to happen if you make some of these mistakes they put you in jail right away Jim no of course not you're not going to go to jail if you make any of these mistakes really for most mistakes having to do with your business you're probably not not going to go to jail unless you're doing like fraud stuff then you might if it is so bad that it's criminal but I feel like I don't really even half I shouldn't have to mention that as a mistake like no don't defraud people that's a mistake and you might end up in jail but for the rest of these what's the worst thing that could happen probably is piercing the corporate veil which don't let the corporate part throw you off it applies to llc's as well and what that means if you're not familiar with an LLC the idea is that it's limited liability the liability is limited to the LLC itself and kind of what we've put into it but our personal liability is protected from the llc's liability so it's debts obligations liabilities are with the LLC and our personal assets aren't at risk of that but on occasion a court will decide to pierce the corporate bail and hold the llc's members personally liable for its debts obligations Etc or outside of that even if it's not piercing the corporate veil some of these mistakes might result in just unnecessary hassle unnecessary money time being invested that you really didn't need to now the first three mistakes I'm going to talk about are the ones that are just kind of added hassle the next three are the ones that might put you at some risk of piercing the corporate bail so what's the first Common mistake that you're going to want to avoid in your single member LLC it is forming your LLC in the wrong State please please I beg of you please stop forming companies in Delaware Wyoming Nevada unless you actually live in those States in that state then it makes sense to form there but if you don't live in a state it's almost never going to be really beneficial to register a business an LLC in that state let's talk about Nevada for example Nevada doesn't have an individual income tax so so you might think well okay if I register my LLC in Nevada I won't have to pay income tax but no if you live in a state that does have income tax you're still going to have to pay tax in that state you don't avoid getting out of taxes just because you've registered in Nevada Delaware of course is a really popular state for people to form in and it makes sense for many large corporations to form in Delaware because Delaware doesn't charge a corporate tax if you're registered there but not actually doing business in the state no corporate tax in that instance but guess what Delaware does charge a pretty hefty franchise tax or kind of an annual fee currently for llc's it's going to be at least 300 bucks so compare that to say Colorado where our annual fee is ten dollars sure you may not have a corporate tax in Delaware but you're still paying 300 versus the 10 dollars that you would be paying in Colorado and then Wyoming again is kind of popular because because they permit what's called an anonymous LLC you don't have to put your personal information as the members or of the LLC it doesn't have to be on the public documents in Wyoming so people want to form there to kind of help protect their privacy but if you're operating the business from another state again let's say Colorado you're still going to have to register the LLC as a foreign entity in Colorado or in whatever other state you're actually in because you're there operating the business in that state so Colorado in this example is going to want your LLC to be registered as a foreign entity in Colorado and so just because Wyoming allows this little bit of privacy doesn't mean that the state that you're in has that same kind of thing and you're still going to have to register there anyway and for the record like Wyoming isn't the only state that lets you kind of protect your privacy in this way Colorado at least again has some means of staying private the articles of organization in Colorado don't require there's no requirement that the members or managers names or addresses be on the public documents it just requests the name and address of the persons forming the LLC which doesn't have to be the members and or the managers often I have clients who come to me and they want to kind of protect their privacy too for one reason or another so I will act as the person forming the LLC it'll be my information on the paperwork that's publicly available and then kind of in the on the back end there's a document an agreement between me and the client that makes it clear that I'm just the organizer of the LLC and they my client are actually the owner the member they're the ones that hold all the interest in the LLC I'm just the organizer so while Colorado doesn't call it an anonymous LLC there are also ways that we can kind of keep you Anonymous in Colorado and if you're trying to stay Anonymous to protect your prior privacy for privacy purposes that's one thing but I talk to people who are like I want to make it I want it in Wyoming because it's private Anonymous and so I won't be able to get sued being anonymous isn't going to prevent the LLC or you from being sued because of something the LLC does it might make it a little more difficult for whoever wants to sue you to do so but it's not going to prevent it from happening it's extremely rare that I suggest to someone that they form an LLC in a state other than the one that they're living in 99 out of 100 times it's going to make the most sense and be the most appropriate to form the LLC have it registered in the state that you live in or that you're domiciled in or where you consider to be your home all right moving along to mistake number two which is making an S corporation election too early you may have heard that by electing to be taxed as an S corporation you can potentially save a significant amount in taxes and that is true in a lot of cases but just because you might say a little bit in taxes doesn't always make it worth it and makes sense to do that S corporation election because as an S corp you're most likely going to have some added accounting costs you or your tax preparer hopefully will have to prepare an S corp return which you wouldn't have to do if you didn't make that S Corp election so that's probably going to cost you a little bit more and as the owner of an S corporation you have to pay yourself a reasonable salary and if that reasonable salary is too low in the eyes of the IRS then you'll probably be subject to fines and interests and penalties because you haven't paid yourself enough through that reasonable salary and again you'll likely have added accounting costs because ideally you'll work with a CPA or a tax professional to help you determine what that reasonable salary is so while an S corporation might be worth it for some it's not always going to really make sense for everybody and particularly in the beginning of a business when you're the profits and the income might be kind of low it usually makes more sense to hold off on the S corporation election and do it a few years in and the third mistake that is mainly going to just be a hassle but it could potentially also get you into like piercing the corporate veil territory maybe is using a PO box for your business's principal office address or for the main headquarters or main office address of the LLC this could also potentially apply to using your home address when you're setting up an LLC Most states when you're forming the LLC when you're filing the articles of organization or whatever form you have to file they will want the business's address often referred to as the principal office address and Most states want that to be an actual physical address not a PO Box again are you going to go to jail because of it no you might have some added costs if you know the Secretary of State or the government gets wind of it you could potentially actually have your LLC administratively dissolved because you're not compliant because you're not you know following the requirements that you have to be and if you're using your home address well there's nothing inherently wrong with that it should be you know pretty legal to do that again if we're trying to protect privacy if we want to not have our home address up there or if we move frequently or maybe you have roommates or you live with your parents or something like that you may not want your home address to be publicly available and this especially applies if you're using that address as the registered agent address too that's a big time No-No with a PO Box that you definitely don't want to use a PO Box for the registered agent address and it's not always a good idea to use your home address as a registered agent address either because again you may have roommates people other people living in your home and that's the address where the LLC will be served with court paperwork if there's ever like a corporate proceeding or a legal issue so you may not want to be served at your home so often the best way to get around this is going to be leasing an actual office leasing a virtual office or getting a virtual office address or something where you can get a physical address even like a private mailbox through like a UPS you still can't do that for the registered agent address though because the registered agent address there needs to be someone there like during normal business hours and they need to consent to being the registered agent and accepting service of process on your behalf and all that stuff so even with the like private mailbox still shouldn't use that for your registered agent address check the description if you want some more info about virtual offices I've got a discount code down there for Alliance Virtual Office if you're trying to keep you know your home address or you want to avoid using a PO Box all right now we're going to get into the three mistakes that could really put you at some risk and potentially get you in that piercing the corporate veil situation number one is thinking you don't have to to follow corporate formalities just because you're a single member LLC things like having an operating agreement for example which is like the a kind of internal governing document for the LLC you might think I'm the only member I can do whatever I want with it which you kind of can to an extent but that doesn't mean you get to get out of needing an operating agreement some states actually require that you have it some don't it's kind of optional in many states but even if it's not required it's still a really good idea because it helps to uphold that liability protection that you get from the LLC because it's kind of one piece of paperwork one documentation that you can show that yes I'm operating this LLC legitimately I'm doing things that I have to to keep it separate from me and I'm following some of these you know corporate formalities that may seem kind of silly but you should do them anyway what I like to do is pretend you're in a multi-member LLC and do all the things that you would normally do in a multi-member LLC so again an operating agreement in a multi-member LLC we would typically have like meeting minutes or resolutions or consents to action if we're making you know big decisions within the business just because you're meeting with yourself or you're the only decision maker again doesn't mean you get out of all those formalities and certain requirements the fifth mistake which is a pretty big one is not entering into contracts and agreements on behalf of the LLC if you're about to sign a contract somebody gives you a contract and in the opening paragraph it says this contract is between such and such and your name not the llc's name that's going to be problematic because it is you entering into that contract not the LLC we want the LLC to be the party that's named in that contract and the same goes for when we are signing on behalf of our LLCs we don't want to just sign our name and have the signature line just say our name there and that's it we need to make it clear that we are signing this contract on behalf of the LLC and in our capacity as an agent of the LLC so there's no like strict way that this has to be it doesn't have to look a specific way but what I generally recommend when you're signing a contract or signing most things that are legally binding is it should say your company name so in my instance it would say 180 Loco LLC and then buy that's where I would sign it Aid in Durham and then under that have my printed name and my title so Aiden Durham member that way it's clear that it's the LLC that's entering into this contract I'm signing it in my capacity as a member of the LLC and finally the last mistake that you definitely definitely need to avoid is not keeping personal and business finances separate separate separate separate separate is the name of the game in here especially when it comes to single member llc's we want to make sure our LLC is separate from ourself because otherwise if it's not separate then why shouldn't ourselves be liable for this stuff so that means you know obviously separate bank accounts you need a business bank account business checking account don't just use your personal account for that not using your business funds or your business money to pay for personal expenses or really vice versa have a specific business credit card for business expenses if you want a credit card separate you know accounting records if you do if you have like personal bookkeeping stuff like in QuickBooks or something you want to have separate accounting records for your business and separate for your personal just keep it all separate because if you're co-mingling everything if your business and personal stuff are just kind of mixed together not only is it going to be a headache for you kind of accounting and tax Wise It's also going to put you at a lot of risk of piercing the corporate bail because again why should a court honor the separateness of an LLC if you're not going to honor it and so there you have it folks again if you make these mistakes you're probably not going to go to jail uh it might just be an added hassle or you put yourself at a little bit of risk personally of piercing the corporate veil if you learned a thing or two please go ahead and give me a thumbs up and again don't forget to subscribe if you haven't already done so click the little bell so you get notified when I post a new video and check the description for links to additional information and resources if you're looking for more info about single member llc's and kind of how to properly operate it and protect yourself personally I've got a great video with some tips on how to pay yourself as a single member LLC I'm going to put it right here I'll meet you over there thank you all so much for watching I'm Aiden Durham and I'll see you next time