Hello,

I have several questions regarding my sole proprietor LLC.

I have applied for my LLC with my state and am waiting for the response.

Meanwhile, I want to open a bank account for my company. Questions:

1) Do most major banks handle this kind of thing?
2) What will I need (besides money)? I figure I will need an EIN for the DBA of the LLC. Will I also need any LLC documentation issued by the state?
3) Lets say I initially start the company with $1000 in the account. When the deposit is made, are the funds then considered an asset of the company? Is this amount reported on my personal taxes anywhere? From the standpoint of my personal taxes, is this initial startup money tax deductible?

This is a great forum, thank you!

I am assuming you are going to disregard the LLC entity for income tax purposes. In which case:

1) Do most major banks handle this kind of thing? 2) What will I need (besides money)? I figure I will need an EIN for the DBA of the LLC. Will I also need any LLC documentation issued by the state?
Probably consider you similar to a corporation and will require any documentation that you have with raised seals that show you can do business with that name. Each bank may have slightly different requirements. You'll most definitely need an EIN and have to provide your SSN.

3) Lets say I initially start the company with $1000 in the account. When the deposit is made, are the funds then considered an asset of the company? Is this amount reported on my personal taxes anywhere? From the standpoint of my personal taxes, is this initial startup money tax deductible?
You will file a Schedule C and disregard the entity for income tax purposes (unless for some reason it is more beneficial to not disregard the entity, but I can't think of one for a new business). You will then be reporting your business as a sole proprietorship and the initial deposit will just be, well, your initial investment. You need to keep your business money separate from your personal money in order to retain your limited liability status, but the money you make can be drawn anytime you want and the IRS will tax all income, regardless if it's drawn from the business or not, as though you are self-employed (when you finally have a positive net income).

Because LLCs are filed at the state level, each state has its own rules, but I believe generally LLCs for income tax purposes are treated at the state level similar to how the IRS treats them.

Thanx so much for your reply. You obviously have a lot of experience doing this right!

I coupla of follow-ups if you don't mind:

3) Lets say I initially start the company with $1000 in the account. When the deposit is made, are the funds then considered an asset of the company? Is this amount reported on my personal taxes anywhere? From the standpoint of my personal taxes, is this initial startup money tax deductible?
[b]You will file a Schedule C and disregard the entity for income tax purposes (unless for some reason it is more beneficial to not disregard the entity, but I can't think of one for a new business). You will then be reporting your business as a sole proprietorship and the initial deposit will just be, well, your initial investment. You need to keep your business money separate from your personal money in order to retain your limited liability status, but the money you make can be drawn anytime you want and the IRS will tax all income, regardless if it's drawn from the business or not, as though you are self-employed (when you finally have a positive net income).

OK, I think I see. But, just so that I am clear on the issues, I will summarize in detail what I think I've learned from your response. Can you verify if the following are true statements?

1) I am the only owner of the LLC, so I will file my taxes as a sole-proprietor ( automattically disgregarding the entity. )

1) The initial $1000 startup money is not tax deductible from the get-go (from the standpoint of my own taxes). In other words, by just putting $1000 into a company (be it my own company or another company) does not instantly create a deduction for me in the amount of $1000.

2) If any of the $1000 is used for legitimate business expenses (per IRS rules), then that amount is tax deductible via a Schedule C.

3) I'm trying to understand the litigation/liability aspects a little better. Lets say the initial startup investment in the company is $1000. The very next day the company gets sued. If found guilty, the company can only be liable for the totality of its assets - in this case $1000.

Again, thank you so much for sharing your experience with owning your own business.

1) I am the only owner of the LLC, so I will file my taxes as a sole-proprietor ( automattically disgregarding the entity. )
Yes, however, when you file for the LLC with your state, you will have to tell them at that point that you are going to disregard the entity for income tax purposes. As long as you do that, you do not have to notify the IRS about anything because technically, you are a sole proprietorship to them.

1) The initial $1000 startup money is not tax deductible from the get-go (from the standpoint of my own taxes). In other words, by just putting $1000 into a company (be it my own company or another company) does not instantly create a deduction for me in the amount of $1000.
Not tax deductible. No money that you will put into your own business will be tax deductible. Nor will you have to pay tax ON it like you would if you had net income. In other words, your investment is not considered income since you will be an LLC disregarding the entity.

2) If any of the $1000 is used for legitimate business expenses (per IRS rules), then that amount is tax deductible via a Schedule C.
Any money that you spend, period, whether or not it is from the initial $1,000 or from your sales revenues, will be eligible for a tax deduction according to IRS rules. You will also be able to deduct other things if your business is in your home and you have a dedicated area set up just for your business like a portion of your utilities and depreciation on your home. Just like any other sole proprietor can do.

3) I'm trying to understand the litigation/liability aspects a little better. Lets say the initial startup investment in the company is $1000. The very next day the company gets sued. If found guilty, the company can only be liable for the totality of its assets - in this case $1000.
Well, as I said, each state is different, so I can only generalize based on my LLC in NY. First you have to set up the LLC and get it approved by the state. You'll get a piece of paper probably with a seal saying that you're a recognized LLC in your state. Then some states require you to put a public notice in the paper, the length of time which the notice is required to be in the paper and the number of newspapers you have to put it into is determined by the state. The newspapers will send you a receipt of all the public notice and you have to send that into your state as proof that you notified.

Then you have to make sure that you always treat your business like a separate entity. What I mean by that is, suppose you get a check in the amount of $20 made out to Your Company Name. You MUST deposit that check into your business account even if you then turn around and draw it out as a cash disbursement to yourself. If you were to deposit that check into your personal savings and someone sued you, their lawyer would make the case that your business really isn't a separate entity because look - you comingled your funds with your personal assets. Anyway, it really isn't a big deal. Just make sure all sales revenues are initially deposited into your business account first.

Again, thank you so much for sharing your experience with owning your own business.
Anytime!