LLC formation and startup capital

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1

Originally Posted By: John Stone
This post was automatically imported from our archived forum.


This question maybe beyond the scope of any one here, but here it is.


I am a newbie to home inspection and am trying to get my ducks in a row. I read a post on here about LLC's and have decided to go that route. It will be a one-owner LLC, and the question I have to any of you who operate as an LLC is about investment capital. I have some cash reserves, but I also have a new credit card that offers 0% for a year on purchases. I want to use the credit card to pay for things like equipment, insurance, etc. to get started.

Is it okay to use a personal credit card as a form of startup capital and still maintain the isolation of personal finances from business finances? I view it as my personal share of startup money for the LLC. Once it is up an running with a profit, I could then get a line of credit in the LLC's name. Does this make sense to anyone?

I also want to join NACHI, but do I join personally or as the LLC? I think the membership dues would be deductible on the taxes.

2

Originally Posted By: dplummer
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Hi John! Makes sense to me, however, I’m


not an accountant. Check with a professional


to be sure. I think you can show your personal


investment into your co as a shareholder loan.


Welcome to the exciting world of HI’S! Oh ya,


Join NACHI, it’s the best thing you can do.DOUG

3

Originally Posted By: kweiss
This post was automatically imported from our archived forum.


I too just started my Inspection business and went the LLC after consultation with an accountant and attorney. I would highly recommend finding a good attorney to set up your company. While there are websites that will do it cheaper, I found a very good attorney who is also very reasonable by networking through friends and relatives. I decided that the extra couple hundred dollars was well worth having his expertise on all the detail of setup. Plus now I have a relationship with him and can get him to look over my different paperwork.


As far as the personal credit card etc, I would advise using that card for your business only. Stuff you buy personally for the business can be donated then reimbursed for. Just keep good clear records.

4

Originally Posted By: Vince Santos
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Forming an LLC is actually very simple. I recently formed an LLC and was able to do so on my own. If you plan to go alone, you will only need to fill out an Articles Of Organization form which can be located on your State web site, mine was www.mich.gov. If you are planning on having more than yourself in the LLC you will need an Operating Agreement. This is a document stating how the business is run, as far as who makes the decisions and how. Don’t worry about the Operating Agreement if it’s just you.


I Just download the document and sent it in to the State with a $50.00 dollar check and that was it!


I spoke with three different Attorneys about this and two of them wanted to charge me around $550.00 to do it. The last Attorney I spoke to told me it was very easy to do and said I should just fill out the Articles of Organization and send it in.


Done deal and I saved $500.00…


You have to remember, Attorneys are not in the business to not make money. It would not even be worth their time if they could not make money off doing it for you.
If you need any help just drop me message and I will do what I can.

--
Desire is half of life, indifference is half of death.
--Kahlil Gibran

5

Originally Posted By: gjohnson
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Most new business owners find themselves needing to use personal credit cards for their business.


All I would say is to make sure that you use that CC only for Business, that way you have a clea record of all your expenses for the business.

--
Gary (Snicker's) Johnson - Free NACHOS
The NACHI Foundation
Executive Director

301-591-9895

6

Originally Posted By: Vince Santos
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Good point!


Open up a business account after forming the LLC and use it for business purposes only. Most business accounts will provide you with a CC. Be sure to shop around for the best offer.

--
Desire is half of life, indifference is half of death.
--Kahlil Gibran

7

Originally Posted By: ekartal
This post was automatically imported from our archived forum.


Don’t use your personal CC for business. This is how attorneys pierce the corporate veil and swoop in on your personal finances.


Erol Kartal

8

Originally Posted By: rray
This post was automatically imported from our archived forum.


gjohnson wrote:
All I would say is to make sure that you use that CC only for Business, that way you have a clea record of all your expenses for the business.

Alternately, keep very meticulous records during that start-up period. Every expense, no matter how small, is a valuable business expense. Having a CC only for business is not as critical during the start-up period as it is later on, providing that you have a business plan. In your business plan you should have defined your start-up period, your goals, your expected time to profitability, projected cash flow and expenses, et. If you've done that, and keep meticulous records, you should be okay. But as quickly as possible, get some credit cards or cash for business and keep business and personal separate.

--
Home inspections. . . .
One home at a time.

9

Originally Posted By: rray
This post was automatically imported from our archived forum.


ekartal wrote:
Don't use your personal CC for business. This is how attorneys pierce the corporate veil and swoop in on your personal finances.

Generally that is true. That is why it is very important to document expected occurrences in your business plan and how you are going to meet them. If you have a definite business plan, and you can show exactly what you have done, are doing, and will be doing, generally you'll be okay. But you also do have to exert a certain amount of business acumen and care while you are doing it.

Reading case law summaries in your state about how businesses have been sued can be very educational.

Prepare, prepare, prepare.
Document, document, document.

--
Home inspections. . . .
One home at a time.

10

Originally Posted By: gjohnson
This post was automatically imported from our archived forum.


In most places it is the standard practice to use a personal CC for business until they get situated enough to get their own accounts for business.


After talking with an Attorney last night, he told me that as long as you do as Russell says and keep very very good records of your expenses on that card you will be fine. He did tell me that if you are planning on using your personal card for business make sure that you only use it for business. Don't start charging personal things on it till you are done using it for the business...

--
Gary (Snicker's) Johnson - Free NACHOS
The NACHI Foundation
Executive Director

301-591-9895

11

Originally Posted By: Vince Santos
This post was automatically imported from our archived forum.


Here is another question concerning LLC’s


Are there any repercussions as to what I do with the money I make off my business?
Say for example paying the mortgage, buying groceries or whatever else I want to spend the money on?

After all it's my money, should'nt I be able to spend it on whatever I want?

The reason I am posting this is because I read somewhere that you may not use money from your company account for personal obligations. Well what then, I can only spend the money on the business?

--
Desire is half of life, indifference is half of death.
--Kahlil Gibran

12

Originally Posted By: tallen
This post was automatically imported from our archived forum.


Pay yourself a salary from your business account deposit it in your personal account and pay the bills. That’s what I was told to do anyway.


In my case that is also how they figure my workmans comp payments.


Of course my salary varies from month to month ![icon_lol.gif](upload://zEgbBCXRskkCTwEux7Bi20ZySza.gif)

--
I have put the past behind me,
where , however, it now sits, making rude remarks.

www.whiteglovehomeinspections.net

30 Oct 2003-- 29 Nov2005

13

Originally Posted By: Vince Santos
This post was automatically imported from our archived forum.


But don’t you still have to keep records of where your money goes. If I put the check in my personal account would’nt that be using the money for personal obligations etc.?


I'm very confused about this and hope someone can put me straight ![icon_confused.gif](upload://qv5zppiN69qCk2Y6JzaFYhrff8S.gif)

--
Desire is half of life, indifference is half of death.
--Kahlil Gibran

14

Originally Posted By: dfrend
This post was automatically imported from our archived forum.


No Vince, like Todd said, pay yourself. It is your money, but don’t write the check for groceries from the company account. The way my attorney explained it is this: keep the records separate (business vs. personal), but you can make payments to yourself as you arre a “pass through entity”. I record my income on my 1040 schedule C, so in essence, my business money is personal money.


What he told me I don't want to do is be buying the groceries and what ot from the business account because then it could be seen as trying to pass it off as a business expense.

I hope I got it right.

--
Daniel R Frend
www.nachifoundation.org
The Home Inspector Store
www.homeinspectorstore.com

15

Originally Posted By: gjohnson
This post was automatically imported from our archived forum.


Ditto what everyone said. Whenever you own a LLC or a Corporation pay yourself a salary first. Then when that money is in your personal account you can use it for whatever you want.


It may sound like a pain in the a$%, but that is the best way to do it to protect your interest.

--
Gary (Snicker's) Johnson - Free NACHOS
The NACHI Foundation
Executive Director

301-591-9895

16

Originally Posted By: kmcmahon
This post was automatically imported from our archived forum.


Do any of you write off a portion of your mortgage? Do you pay it out of your business account or write a check to yourself for rent and then pay your mortgage yourself?

–
Wisconsin Home Inspection, ABC Home Inspection LLC


Search the directory for a Wisconsin Home Inspector
17

Originally Posted By: rray
This post was automatically imported from our archived forum.


But everyone seems to be missing the main reason why you must pay yourself a salary. That is taxes. The IRS and Social Security Administration want their money, and they get it as a tax on income.


Generally, and there is no fast and set rule to go by when you are a start-up company, you can go about a year without paying yourself a salary. Most of your capital can be considered a personal loan to the company. Of course, loans have interest on them and can be paid back. So you can pay yourself back ("loan repayment"). However, if you pay off the interest on your loan, that interest becomes income for you.

You must pay taxes on income.

Many, many a person has tried to pay off personal bills without paying himself a salary, thereby eluding the tax man, and many, many a person has been found guilty and sentenced to probation or, depending on the amount, jail.

Don't go there.

Pay yourself a salary as soon as you can. And as someone said, pay youself a salary first. You can always loan it back to the company if necessary.

Just keep very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very, very accurate records.

In other words, keep very accurate records.

This is not tax advice as the poster is not qualified in the State of California, nor any other state, to offer tax advice. Please consult an appropriate tax attorney, tax advisor, tax consultant, or a CPA specializing in tax laws for your state. Poster is only qualified to drink margaritas under the guise of a home inspector.

--
Home inspections. . . .
One home at a time.

18

Originally Posted By: rray
This post was automatically imported from our archived forum.


Hey, Kevin.


I don't believe you can "write off" per s? a portion of your mortgage.

However, if you are a home-based business, when your CPA does your taxes, he will help you figure out the appropriate deductions for "rent," heating and cooling, water, electric and gas, etc.

Just keep very, very, very. . . oh, never mind. I already did that.

Just be very forthright and honest with your CPA. A good one knows all the loopholes and will find them for you.

--
Home inspections. . . .
One home at a time.

19

Originally Posted By: jrooff
This post was automatically imported from our archived forum.


Talk about sexiest, are all CPA’s he’s, mine is a she, and a d@M good one icon_wink.gif

20

Originally Posted By: kmcmahon
This post was automatically imported from our archived forum.


what’s the average cost of a good CPA?

–
Wisconsin Home Inspection, ABC Home Inspection LLC


Search the directory for a Wisconsin Home Inspector