A key benefit of limited liability companies is that the owners (or “members”) receive limited liability; that is, they can usually not be held personally liable for the debts of the LLC. In addition, if the LLC is sued, the owners’ personal assets are not subject to collection.
However, there are some instances when — as lawyers say — the veil of limited liability is pierced and the LLC members can be personally liable for the debts of the LLC.
Before sitting down to write a business plan for your LLC, first write a business plan outline. This outline will contain all of the pertinent information that you need to include in your business plan and will form the basis of your brainstorming. Your outline will serve as your business plan template and should reflect your core business model. Though you need not submit the results of your brainstorming to the state, it is a good idea to have a solid business plan before registering your LLC. Discuss your plans with your fellow members and use the following outline to guide your strategy.
In an employer-employee relationship, half of Social Security and Medicare taxes are paid by the employer. When you are self-employed, you must pay the full Social Security and Medicare taxes on your own. This additional share is referred to as the self-employment tax. The self-employment tax rate is subject to change, but is currently 15.3%, which consists of 12.4% Social Security tax and 2.9% Medicare tax. For the 2011 tax year, the self-employment tax rate will change to 13.3%, which consists of 10.4% Social Security tax and 2.9% Medicare tax.
Business write-offs can help your LLC save a lot of money in income tax. Remember that write-offs are deductions rather than credits; they allow you to reduce the amount income you must pay taxes on, which results in an indirect savings in tax payments. The amount you save from a write-off depends on your tax bracket.
Planning for business losses is rarely at the top of the todo list for LLC founders. However, recognizing and planning for potential negative revenue will help to keep your business stable. This is why it is so vital to create not just a profit-sharing provision in your operating agreement, but also a loss-sharing provision.