Up until this point, Gaucho Software hasn’t had a selling product, so I have been putting off actually registering it as a company, if for no other reason than to not have to worry about the 2004 tax year. Now with the impending release of Seasonality, I figured it was time to register Gaucho Software as an LLC. This just gives me as a person some separation from Gaucho Software the company. Forming an LLC or a corporation is just a smart thing to do if you have your own business.
As you can probably guess, there is a lot of legal stuff that you have to take care of in order to do this. The most obvious change is that you need to keep company finances separate from personal finances, otherwise you may not be granted liability protection, which would defeat the whole purpose of forming the business entity. Here are a couple of other things that I have learned in the process:
- If possible, have your fiscal year end on December 31st, so when you go to file your tax forms they are due on April 15th, the same day as your personal tax filing.
- LLCs do not pay taxes on income, as the tax is passed along to the LLC members and claimed under the members’ personal income. However, LLCs need to file form 1065 every year to report earnings.
- If you are the sole owner/member and the LLC has no employees, then you don’t need a federal Tax ID number.
- Every LLC has to have a Registered Agent with an address in the state that you are registering your LLC in (no PO Boxes). The only purpose of the Registered Agent is to have a physical body that can be used in case someone needs to guarantee delivery of papers to your company, like in the event of a lawsuit. In the case of Gaucho Software, the Registered Agent is just myself.
- Every state has slightly different laws, but in Michigan you need to file the name/address of the Registered Agent and Registered Office every year to the Secretary of State’s office. There is also usually a yearly fee to cover the costs of the filing.
I ended up doing my filing through an online company called LegalZoom. There are tons of different companies that will do the filing for you (just search for create LLC online). I found LegalZoom while visiting Entrepreneur Magazine’s website, and a quick Google search found many recommendations for LegalZoom across the web. Filling out their online form is a fairly quick and easy process, and I should have copies of the final documents submitted to the Secretary of State within 20-35 days. If I have any problems with them, I’ll definitely repost them here, but with their money-back guarantee, I don’t think there will be an issue. If you don’t feel comfortable doing something like this online, you can pay a little bit more and hire a local attorney. One that I talked to here said she would take care of everything for $500-600 plus the cost of extras like a company stamp or a set of books to start off with, etc.
Anyway, I thought I’d share some of this in case anyone else out there is thinking of creating their own LLC. If anyone else has anything to add, please post it in the comments.