Sole Proprietor vs. Limited Liability Company (LLC)?
First, of all, are you actually in business? If you’re asking this question, the most likely answer is yes. There are several small ways that you could be in business, including buying and selling online, buying and selling at a farmer’s market, or even selling anything homemade to your friends on your front porch. If you are doing any of this under your own name, you’re considered by the state of North Carolina to be a sole proprietor. Being a sole proprietor means that at a bare minimum, you are required to pay sales and income tax.
Alternatively, if you have at least one business partner, you’ll incorporate your business as an Limited Liability Company, otherwise known as an LLC. An LLC is created by filing Articles of Organization in compliance with the North Carolina Limited Liability Company Act. The Articles are filed with the Secretary of State of NC. Here at King Law, we can take care of this for you, including all fees, for $750.00. Limited Liability Companies are overseen by their managers, those who begin the small business. An LLC is a common and less risky option to start a small business
LLCs as the Safer Alternative to a Sole Proprietorship.
The liability of members of an LLC is limited to their capital contributions. Essentially, an LLC protects the assets of members because the liability is limited for each member by how much each one choses to invest in the business. There is no danger of seriously damaging financial loss unless the members choose to invest everything they have into the LLC. There are additional tax characteristics which make an LLC an attractive option. An LLC is not taxed on its income. Rather, members are typically taxed on the income of the LLC unless they elect to be taxed as a corporation.
Paying Small Business Taxes
As mentioned above, sole proprietors are responsible for paying sales and income tax to the state in order to be considered a small business. These taxes are paid to the North Carolina Department of Revenue (NCDOR). Small business pay these taxes online through the state’s e-Services website. Before paying the taxes, the small businesses must first register with the NCDOR to use the eBusiness Center. This registration can be done online or through the mail. Once registered, the small business will receive a Certificate of Registration.
How does Termination of the Business Work?
There are several ways for an LLC to terminate. First, it might dissolve upon the death or withdrawal of one or more of the members. However, just because a member dies or withdraws, does not mean that the LLC automatically ends, this is merely the most common way for LLCs to terminate. Beyond this method, there could be a variety of circumstances dictated in the Article of Organization or some other Written Agreement which spell out the terms of an LLC’s termination.
King Law Offices is a full-service law firm with an outstanding team of professionals who work diligently, creatively, and compassionately on behalf of our clients each day. If you need help navigating your small business needs, contact King Law at 888-748-KING (5464) for a consultation. We have offices located across western North Carolina and upstate South Carolina. We are here to serve you and to guide you as we navigate this journey together.