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Hi, I'm working on starting my own LLC and my question is whether it makes a difference to wait for after January 1 for the 2021 tax year or just start the process now? Will there be any tax implications for this year even if I do nothing for the next month when the LLC is formed?
Thank you.
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If you are going to be a single member LLC and will not incorporate then it makes no difference.
I can only say it makes no difference on your federal taxes. But if your state taxes personal income, since an LLC is registered at the state level, I can't speak for that. Also don't know what state you'll be registering in.
In my state of Florida, when you register an LLC the default registration status is "active". For me, that's not a problem. Since FL doesn't tax personal income they're not expecting a tax return.
I know in some states that do tax personal income, you're expected to report business income/expenses every year the business is "active". Weather it has income or not doesn't matter. If you're in such a state, I understand the possible delima this can cause.
For example, if you are trying to open a business banking account, the bank may require your state registration number. You can't provide that until you register. Just make sure that you initially register as "inactive" if you don't expect to actually be open for business in 2020. That will get you your registration number so you can open the bank account, as well as do other things such as get an EIN from the IRS.
THen when you're ready to actually "open for business" make absolutely certain the status is changed to "active" before you produce one single penny of business income. (back in my day in the 90's, Hawaii was notorious for permanently shutting down a business if it opened before the status change took effect.)
many states have a stiff annual fee for being an LLC. the decision is really up to you.
I was of the understanding that all states charged a fee. At least a registration and renewal fee each year. In FL it's around $125 to $160 a year, while it CA it's over $800 a year.
@Carl wrote:
I was of the understanding that all states charged a fee. At least a registration and renewal fee each year.
All states charge some sort of filing fee, but the fee is rather nominal in several states (around $50).
Further, there are a number of states (around 8 or so) that do not charge an annual (or renewal) fee.
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