Updated January 2019
You’ve made a New Year’s Resolution: this is finally the year you make the jump from sole proprietorship to limited liability company. That’s great, but you’re not the only person with a resolution! In fact, so many people wait to start their LLCs on January 1st that we’re anticipating state processing times to inflate dramatically. Did you know that in most states, you could have a legal formation date of January 1st, beat the mad rush at the beginning of the year, and benefit from some end of year accounting as well?
Yes, you CAN have it all, but you need to start your LLC today!
Have you covered all the bases? Make sure with our simple 10-point compliance checklist for business.
Let’s review the benefits of forming an LLC before the end of the year:
Most states allow you to select a future effective filing date (when you would have filed anyway), either by completing a field on the formation document or by adding a provision. That means you can file today, and the state will list January 1 as the date of formation.
In case you’re wondering, having an LLC has a number of benefits. The largest of course is limiting your personal liability. It also adds credibility to your business, and doesn’t complicate how the business is taxed. For more, read up on the difference between a sole proprietorship and an LLC in this article.
What’s so great about January 1, anyway? Well first, it’s easy to remember. It also makes bookkeeping and accounting cleaner. Your business should have a good accountant, and separating finances between calendar and fiscal years makes his job, and yours, a whole lot easier.
When you submit your formation documents with the state, you must pay a filing fee. By filing before the end of the year, and selecting January 1 as the effective date, you could expense state and service fees in your current tax year, saving a bit of money on your taxes.
Many states expect you to file a return at the end of each year. If you form an LLC in the later part of the year, you could be expected to file a report or return, or pay taxes, even if you really haven’t done anything. If you select January 1 as the effective date, you can still file, and worry about these items at the end of the year.
Thousands of people in every state decide to start a business each year, and a huge chunk of them do it on January 1. As a result, Departments of State get extremely busy, and their processing times (how long it takes to review and approve your application) can slow down due to volume and holiday closures. Don’t wait in line; file early!
Still unsure? Talk to the experts at Harbor Compliance. We’ll set up your LLC to your exacting standards, and help you manage your compliance responsibilities throughout the new year. View our LLC formation packages, and don’t delay – your business can’t wait!
Featured Image photo credits to “Tales of a Garlic and Onion Lover” (mmmm…) from their website.