Registered Agents, Articles of Organization, and Other Paperwork
Yep, that’s right. I finally scraped together enough coins to file my articles of organization and hire a registered agent. For those of you who don’t know what those things are: articles of organization is just a fancy term for the paperwork you have to file when starting a limited liability company (LLC). The forms vary slightly from state to state, but are usually pretty short and ask you to outline information about your soon-to-be business.
Meanwhile, a registered agent is an entity that handles any legal paperwork that may come your way while conducting business. Hiring a registered agent is usually a requirement for businesses that do not hold regular business hours (i.e., are open between 9am-5pm, Monday through Friday), as your business must be able to receive any legal paperwork sent to it during these hours.
However, it’s important to note that many companies offering registered agent services do a lot more than just receive mail on your behalf if you’re being sued. Many places will file your documents to incorporate, offer business consulting services, and even apply for other things dealing with your LLC like completing an application on your behalf to get an Employer Identification Number.
I chose a registered agent who filed my LLC documents for me for a small fee and also offers a variety of other services. Doing so made the process so. much. easier. However, I still recommend reading up on the incorporation process before filing so that you know what your registered agent is doing for you. It’s always helpful to be informed.
The registered agent company I went with was IncFile.com and things have been pretty good with them so far. My paperwork was approved very quickly and they have a reasonable annual rate.
Employing Other People
My paperwork has been approved and I’m currently registered as a single-member LLC, which means that I’m the sole owner and operator of my business (independent af). However, part of my business plan includes employing friends I work well with to help me with larger projects. This way, we can both make money and they’ll be covered in regards to liability as well. I’ve accomplished this by hiring them via contract rather than in a salaried position. In doing so, all I have to do is get them to fill out a W-9, pay them when the job is done, and give them a 1099 when the year is up. Then, when tax season rolls around, I can write their payment off as an expense. Easy peasy.
Navigating the Tax Landscape
One great thing about choosing to sign up with a registered agent who also offers other services are, well, the other services. A lot of larger registered agent organizations will partner with tax consultancies and the like to offer their clients access to other business resources at a lower rate. It’s definitely an effective marketing strategy. Fortunately, my registered agent offers a complimentary tax consultation through a third party to every new client, which I took full advantage of.
My tax consultation went really well. Granted, I already knew about 80% of what the tax advisor told me, but the new information he did present was extremely useful. One major piece of advice involved choosing to be taxed as a S corporation. For those of you who don’t know, LLCs can choose to be taxed as a disregarded entity (which is the same thing as being taxed as a sole proprietor), a partnership, a S corporation, or a C corporation, all of which have their own advantages and disadvantages depending on the type of organization you’re running.
However, for people like me (i.e., single-member LLCs), choosing to be taxed as a S corporation means that I can give myself a salary. (I know, the idea of paying yourself when your business is just you is pretty weird, but stay with me.) Typically, the salary you pay out to yourself is roughly 35% of your total earnings for the year, which means that you only have to pay the self-emplyment tax on that 35%. This means that the remaining 65% would filter through under the pass-through tax relatively untouched. This is a huge revelation because if I chose to be taxed as a disregarded entity all of my earnings would be subject to the self-employment tax, which is 15.8% of your earnings.
Needless to say, that revelation pretty much changed my life. As a new, small business, I’m still signing clients and working to bring in more revenue, most of which will be reinvested. Therefore, if I can potentially save a few hundred (or a few thousand!) dollars on taxes, then that’s incredible! I’ll be filing the necessary documents declaring how I want my business to be taxed (i.e., as a S corporation) later this week.
A few other things on my “to do” list include opening a business banking account so that I can clearly define and separate my business transactions from my personal spending. I’ll also be revamping my approach to cataloging all my business transactions on Excel, which I’m weirdly excited about. (I love to organize, apparently.)
Anyway, I’ll definitely let you know how things are going in the next few weeks. Keep your fingers crossed that everything continues going smoothly for me!