Hi Lee Phillips here.
I'm gonna talk to you for a minute; yeah I'm a lawyer
that's okay
lawyers don't like me very much, a lot of them don't
but, eh get over it
I want to talk to you about whether you really need an LLC or corporation
if you walk into the lawyer's office and say "Hi here I am Mr. lawyer"
I need an LLC or a corporation
What's he gonna do?
Well he's gonna give you one
because he doesn't get paid until you get one.
You may not want one.
why would you not want
a corporation or an LLC?
Well first of all
you've got to have a business reason
basically for setting those up
and we have an LLC or a YouTube rather
on business reasons
but additionally
there's going to be a cost
there's going to be a hassle
you gotta file tax returns
unless it's a disregarded LLC entity
but there's all this other stuff
that goes along with an LLC.
Do you really need it?
Two reasons you need it
one is tax
and two is asset protection
How are you generating the money?
That will determine the taxation
If going to be a corporation
you're going to either be a C or an S and if you're a C I'm going to come and choke you
I run into people all the time. "Oh I have a C corporation." "Why?"
"Because my accountant said so."
Why the hell did your accountant say so?
Almost never
do you have a C corporation
you got to have a really good reason for me
so if you're a corporation you're going to be an S
if you are making your money as the pass-through
type of passive income source
rents, royalties, that sorts of things
Subchapter S really isn't going to do you any good
so maybe the LLC taxed as a partnership
but in that case basically the only reason you're doing it
it is for asset protection
because the taxation would be the same as if it just came to you on a Schedule C
so you know
how am I making my money?
do I need the tax aspect of an LLC
or a corporation
if you're earning money selling widgets and services
yeah probably an S taxation structure is pretty good
so that would be a business reason
for setting up a company
LLC or corporation.
How about the asset protection?
Well if I'm selling doilies and dollies
on eBay
probably not a lot of liability in that
so you're gonna have to ask a couple other questions
what's my liability?
and if I set up the company is it really going to protect me
from that liability?
so ask what the risk is
if the risk is low
then probably you don't need the company
if it's not a taxation issue
and it's not an asset protection issue
you don't need the company
the LLC or the corporation.
The other question I'd ask is what's the cost of the company?
If you're in California or New York or New Jersey
or some of them other foreign countries
then you don't an LLC or a corporation unless you have to have one
because they're expensive
take the money
put it into insurance
that's the other question
can I get insurance to cover my liability issues
and the fact of the matter is 99 point something percent
of the cases
settle for the insurance.
So if I've got good insurance
and putting an extra thousand bucks a year into your insurance goes a long ways guys
so can I insure it?
How much is the company
to maintain, to set up
then you have to file a tax return so that's going to be another chunk to the accountant
or pain in the butt for you
so think about it.
What's the annual fee?
How much do I really want to deal with this company?
and I will often tell people even in reasonably risky operations
go ahead set up the operation
let's see if we can make any money with it
because by far the vast number of people who set up corporations and LLC's
they never make a dime
it never gets off the ground
so if you can't execute
why bother with the paperwork so to speak
I'm not sure everybody wants an LLC or a corporation
maybe some things that you need to think about
before you run down to the lawyer
or even legal doom
so check it out.
Think about it.