Forming an LLC properly

[fsa3]

Hi,

I've been running a site just personally for a few months but before it grows I wanted to form an LLC to protect myself (since my site collects personal info). Now that my LLC is formed, what steps if any do I need to do to make my site be behind the LLC's limited liability?

Thanks,
Frank

[zomega42]

I'm no expert, but here are some tips I've read elsewhere or can think of from my own experience:

1. Keep personal and business finances completely separate -- bank accounts, credit cards, expenses, etc. This one is very important.

2. Register the business as the owner of the domain, not yourself

3. Make sure all your paperwork is filed properly with the state and that the LLC files the necessary tax forms come the end of the year.

anything else?

[fsa3]

With regards to #1, so it is important that, for example, my monthly hosting fee be paid by the LLC and not by my personal credit card?
In terms of the registration of the domain, I added the LLC's name as the organization but I still have my own name on their (the form required a first and last name). Is that ok?

[LifeinAsia]

#1 is not life or death, but it makes tax time MUCh easier! Plus if you ever get audited, it's really a pain to have to pour over receipts and checks from several years earlier trying to figure out if they were personal or business. If you always keep things separated, it makes your life so much easier.

By the way, it doesn't have to be a corporate credit card- you can take a personal card and designate it for only business-related charges.

[fsa3]

Thanks... I was hoping not to have to get another credit card just for this since the # of transactions will be so limited (for now).

[fsa3]

How about a seperate business bank account? Is that a requirement? I'm just looking at that for the first 6 months the only real transactions will be my monthly hosting fee.

[seanpecor]

If you have an LLC, you will need to file for a federal tax number. You absolutely need the business checking account to be tied to that tax number. And if you originally registered the domain(s) under your own name, you need to do a registrar transfer to the LLC. Along with this, at the advice of your lawyer you need to draft a transfer agreement stating that you are transferring ownership to the LLC so there is a legal document documenting the transfer.

You really need a lawyer do walk you through this so you don't create opportunities for exposure. In my experience the advice you get saves you a hell of a lot more money than you pay for the initial consulting.

Sean

[zomega42]

There is a lot of mixed info on this thread. I think it's because a lot of things depend on what state you're in. But in my state, #1 (keeping business finances separate) is "life-or-death". It's not just for convenience or tax purposes. If you mix your LLC and personal finances, it will make it easier for someone who is suing you to "pierce the corporate shield", which means they can argue that you are personally responsible, not protected by the limited liability company.

Also, in my state, getting a tax id is not absolutely required (as long as it's a single member LLC), but it's easy and I definitely recommend doing it anyway.

[fsa3]

Any idea what type of lawyer would be best for this type of basic stuff?

I'm really trying to keep my costs as low as possible as this website is a "side" venture.

[fsa3]

To make things more confusing does the state you live in or the state the LLC is registered determine the "rules" as discussed in this thread.

My LLC is registered in Delaware.

[seanpecor]

I think if you have a clearly defined need then a corporate or real estate attorney could get your startup package executed for you for not a lot of money. It might be just a couple of documents. I thought about registering in Delaware, but I'm in Virginia, and it turns out Virginia corporate laws were lifted from Delaware and tweaked to offer even more protection for the owners.

An attorney would also be able to answer your basic questions in an introductory meeting. I know it sucks to pay attorney's fees, but it sucks more to lose your kids college funds, your house and so on.

Sean

[zomega42]

Yes, I agree with Sean, you might want to talk to a lawyer. Some accountants can also help you with this sort of thing, and they're cheaper (but not all accountants will know what they're doing).

Technically you have to worry about the laws in both states. (I'm assuming you don't live in DE). I have an out-of-state LLC, but my state requires me to register it in-state as a "foreign llc" doing business in my state. But as far as protection from liability, you are protected under the laws of the state where the llc was formed (delaware), not where you live.