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Tax issues for an LLC - Q & A

Shawn calls from Pennsylvania to ask Rich a question about taxation for an LLC

Rich Sloan:  And we're going to go right to Shawn in Whitehall, Pennsylvania.  Welcome it our show, Shawn.

Shawn:  Hi, Rich, how are you doing?

Rich Sloan:   I'm doing great.  I love the power that comes with not having to have my brother in the studio with me today.

Shawn:  Yeah, definitely a lot quieter.

Rich Sloan:  It's just you and me, baby.  And -- and a few thousand other people around the country, I'd say.

Shawn:  That's good.  That's good.  Well, my business partner and I have started a business that offers the world's first web-based podcasting management service, targeted towards higher education.

Rich Sloan:  Okay.

Shawn:  And my question is, we decided to form an LLC. And --

Rich Sloan:  Really quickly really quickly, why did the world need that service? 

Shawn:   Well, we feel they need the service because podcasting is growing tremendously in education, well, in over the world for any -- in anymarket.  But the fact it's growing so quickly in education, and we just wanted to provide a service that helps facilitate the creation and management of podcasts.

Rich Sloan:  Okay.  The people who would be doing this podcasts would be professors? 

Shawn:   Yeah, professors and also staff.  They would be able to podcast special events and campus news, things like that.  We're trying to keep it open, you know, so you can apply podcasting to many different facets of education.

Rich Sloan:  Okay, great.  And for those of you not in the know, podcasting is simply a way for you to download audio to your computer or to your portable device and listen to it on your own schedule and to sign up for automatic feeds of that information if that's your choice.  Okay.  Go ahead with your question.

Shawn:  Okay.  So, well, we -- wedecided to form an LLC.  And we, for the most part, we understand the benefits of an LLC over something like a corporation or a partnership.

Rich Sloan:  Right.  Real quickly, a limited liability company provides the tax advantage of -- of not having to be double taxed as a corporation might traditionally be but it also provides that liability protection that a -- that a corporation would provide.

Shawn:  Correct.

Rich Sloan:  Yeah.

Shawn:  And that's as much as we understand.  And my question is, do we have to obtain, or do we need to obtain a tax ID?

Rich Sloan:  Yes, you -- you do have to have a tax ID if you're conducting business in the state, absolutely. 

Shawn:  Okay.

Rich Sloan:  So, that -- that's a fundamental part of doing business.

Shawn:  okay.

Rich Sloan:  When you -- now when you register your business, if you register it in your state, you will have a tax ID.

Shawn:  Okay.  All right.  See, I wasn't sure about that because I know in some of the online services that you can -- they can, you know, help the process of filing for an LLC that they it seems to be an option whether or not you want the tax ID or not, so I wasn't sure if it's something that we could get later and -- and use our personal tax, income tax returns for the pass through or we needed to get that now.

Rich Sloan:  Yeah.  You're -- you're forming an LLC most likely because you want to create an entity through which the business gets done and to that--

Shawn:  Right.

Rich Sloan:  -- and to that extent you want to have a tax ID number associated with any of that business.

Shawn:  Okay.

Rich Sloan:  So, I would absolutely make sure that, whether it happens automatically or doesn't, that you make sure that it happens.

Shawn:   Okay.

Rich Sloan:  And that you run your -- your business through that.  And "StartupNation.com," we have the ten steps to open for business.  And in step number seven, we have organize your logistics, and I believe it's there.  Actually, it might be step number four under select a structure, where we give you the option to actually create your legal entity or LLC or whatever it may be right the on the website.  So, you can tap into that if that's a valuable resource for you.

Shawn:  All right.  Great.

Rich Sloan:  All right? 

Shawn:  All right.  Sounds good.

Rich Sloan:  Thanks a lot for the call, Shawn.  Good luck with your service.  Podcasting is a huge phenomenon today and it's a good thing that you're on top of that wave.