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Operating as an LLC


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Imagine that you could have done it yourself by going to sun.biz.org in 2005 I paid $50.00 or $60.00 to become an LLC

LLC is done at State level and can be done online by visiting your State's web site.

Thats interesting....I guess the fees must have went up quite a bit since then. But if I ever have to do it again I will definitly look into doing it myself.

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  • 7 months later...

I'm a little confused here and was wondering if you guys could help me out. I went to the secretary of state's website for my state: IL and there are different types of LLC's. Which one do I want to apply for? LC Assumed Name Adoption,

> LLC Articles of Amendment,

> Corp Articles of Incorporation,

> Low-Profit LLC

I already have a business certificate as well for my county. Do I need to re-submit that with the LLC?

Thanks for you help

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Well... I agree that LLC is a good entity to look into, and in today's tax world, likely better than a corporation with an s-election. (Research dividends vs. draws and bonuses.)

Maybe this can shed more light on the subject?

An LLC is not insurance. Insurance is insurance. Insurance with good coverage that correctly addresses the commercial and personal nature of your business is necessary.

An LLC can be sued. You cannot defend your LLC personally. Corporations must hire an attorney to defend.

LLC's are easier to maintain than Corporations and come with pretty much the same corporate protections. However, piercing the corporate vail to get to the owners is sometimes easier in LLC's because most LLC members don't really separate the business well. They end up co-mingling somewhere along the line. It starts to look like an alter ego.

There is no way to shield yourself from litigation.

There are ways to protect yourself and your family and personal assets.

Setting up an LLC is just the beginning. Running it like a corporation is also important.

Having a good insurance policy is also important.

Giving adequate warnings is also very important.

Above all, a good product is primary. If your product never causes a problem, then you have nothing to be concerned about.

If your product causes a problem, the first line of defense is your warning labels and the user's experience with similar products.

Your insurance will provide an attorney and I am willing to bet that the attorney is going to work overtime to make sure the carrier doesn't get nailed.

You are protected to your policy limits. You are also protected to the limits of your State and Federal debt protection laws. In Arizona, for example, a home is protected up to $150K in equity. If you have no assets beyond the protection laws, then even if you did make a bad product, you're probably going to be fine.

I'm not saying that candlemakers are immune from litigation, just that it is tough to sue and make it stick.

There are basically two kinds of actions that can be brought against candlemakers that I can think of.

One is a contract action. The candle didn't perform as contracted and / or was built in an unworkmanlike manner. There are no punitive damages on contracts. I'm wondering if there are any cases out there where someone thought the candle didn't work and sued. Oh, maybe some large corporate shipping issues, but, Joe Blow bought a candle and it didn't light so he sued?

Another is tort. Tort requires 4 failures to stick against the candle maker. 1) There has to be a duty. Well, there are some duties like duty to warn, duty to test and make a good product, etc. 2) Failure of that duty. If you did what is industry standard, maybe you're OK. If you blew off the duty to test, etc, then maybe there's a failure? 3) Damages. There has to be some damage to the user. Burned finger, house, etc. 4) Causation. This is the kicker. The cause of the damages has to be a failure of the duty. If the causation is not a failure of the duty, then the lawsuit should be dismissed.

Example: Buyer purchases a candle and the candle has a warning tag that warns against burning it near flammable objects and leaving it unattended. Buyer puts it near the curtains, or under a wood shelf, and goes into another room, or goes outside to walk the dog. Curtains/shelf catch fire. Duty to warn was complied with and there does not appear to be a breach. The candle performed as expected and was mishandled. Candlemaker should be able to get the lawsuit dismissed, but it will cost for the attorney. That's why having insurance is good. Insurance carrier pays the attorney and hopefully doesn't jack your rates since you were not liable.

Example: Buyer purchases a candle that is "quadruple scented" and lights it off. Warning says to attend the candle and not use water. Excess FO was bought at dollar store and has alcohol in it. Alcohol lights off, candle blows up. Duty to follow a workmanlike manner in building the candle was breached and a direct cause of the damages despite the warning. Lawsuit goes to a jury. Your attorney does his/her best to get it dismissed by offering policy limits in exchange for a release.

Hope that helps.

Same disclaimer, this is not legal advice. Go see your local attorney for that.

Edited by EricofAZ
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LLCs are a good idea, but check with your state first. Other than the filing fees, in California you are subject to a MINIMUM $800.00 in taxes EVERY year, regardless of profits.

From the State of CA Franchise Tax Board web site,

"The LLC will be taxed at the corporate tax rate of 8.84 percent and will be subject to a minimum tax of $800."

For a lot of small businesses, that would wipe out a good chunk of the profits.

Although I agree with the above, if you live in a state that has such a high minimum tax, getting a good insurance policy until you grow your business maybe a better option.

Disclaimer: This is not legal advice, just common sense. Go see your attorney.

Edited by MissMori
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