I often have clients asking about old LLC’s they’ve set up and not used. Should you keep it or close it?
There is value in your company having age, but at what expense. For example, just this morning I was speaking with a client regarding a new bakery business. Phil explained that his daughter recently graduated from culinary school and is excited to start a bakery. However, having no experience in the “real world,” by the grace of God, his daughter got hired at major casino in Vegas, as a baker. His daughter’s plan is to gain experience and in the next 1-2 years, open her own bakery.
Should she have an LLC for a company that has not yet started? If any of you have ever applied for business credit, the creditors love to see 2 years of age for the LLC or Corporation. However, if you’re investing in real estate, the age is almost irrelevant. For most real estate, depending on the deal, banks usually are looking solely at the value of the property and how much rent you’ll be collecting. Thus, the age of the business is almost irrelevant.
In Phil’s case, we went ahead and set up the LLC to start racking up some age. We know that in 2 years time, she will most likely start her own business. If she gets an SBA Loan, the age is worthless, UNLESS she can show tax returns with profitability. However, if she’s applying for vendor credit and credit cards, the age of the LLC will absolutely help. Most small businesses fail within the first 2 years. So, if you’ve made it 2 years, financial institutions will have more confidence in giving you better credit lines.
Corporate Transparency Act is going into effect January 1st, 2024. We don’t know all the details about this, but we do know FinCEN (the new government agency) will be charging $85 per corporation or LLC on an annual basis. We also know that for most states, you’ll be paying a renewal fee, you’ll pay for registered agent, unless you serve as your own registered agent, and if you live in California, you’ll also pay $800 minimum franchise tax. We also know that you may have to file a corporate tax return, depending on how you elected to be taxed.
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If you have an LLC that is not being used, don’t be short sighted. If you know you’re going to be using the LLC in the near future, keep it open and pay the appropriate renewal fees. However, if you’re not going to be using the company, you should IMMEDIATELY dissolve the company. Though the regulators have not yet figured out logistics to register with FinCEN, they have figured out the penalties. $500 per day in fines and possible jail time. Ouch.
If you need help talking through your entity structure, please do reach out. We have team of experts that can help you.
With NCH, the state’s top business formation service, you can register your LLC in Nevada quickly and easily. Our specialists will help you choose the right entity for your company and understand why an LLC in Nevada is your best option. We’ll assist you with all necessary Nevada LLC forms, including the vital Articles of Organization, and help you comply with state regulations. In addition, we offer expert assistance with tax compliance, credit building, and payroll management. Schedule a private consultation to explore effective solutions to minimize tax liabilities and protect your wealth. Start unleashing your LLC’s full potential today with NCH. Schedule a consultation with Adam Kintigh today!
DISCLAIMER: The above material has been prepared for informational purposes only, containing opinions of the provider, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.