Whether you’re just starting out or things are already up and running, you may be considering forming an LLC for your business. While a Limited Liability Company can protect milspouse-owned businesses, they can come with challenges.
Here’s a look at the LLCs and their pros and cons for military spouses and their businesses.
Why Start an LLC For Your Business?
First and foremost, an LLC is a legal entity.
An LLC is (usually) an inexpensive way to protect your assets; you don’t have to worry about being personally liable for any business debts. If you form an LLC, it protects your personal assets from any legal action people may take against your business. For example, creditors won’t be able to touch your personal bank account or possessions. Instead, they can only collect against your company’s bank accounts and resources.
Pros and Cons
Military spouse-owned businesses need all the simplicity they can get. The beauty of LLCs is their streamlining capabilities. Unlike the personnel requirements that come with forming corporations, (a board of directors, shareholders, etc.) you can be an army of one.
On the other hand, if you want to include more folks in your LLC, you can do that, too. There are no minimum or maximum member requirements to form one, and you have more freedom than with a corporation in terms of how you run your business.
Furthermore, it makes tax filing a little bit easier. When you form an LLC for your business, essentially, you simply fill out a Schedule C when you file your personal taxes. You report your business income, expenditures, and losses and the IRS taxes you at your personal rate. This is true whether you’re a solo act or co-own a business with a partner.
However, if you determine that it’s in your best interest to pay taxes at the corporate rate, you can fill out an election document with the IRS and make that happen.
They Confer Authority
Finally, there’s just something about seeing “LLC” on a business card that inspires confidence. Customers and clients are more likely to see you as a credible, established entity with those three little letters at the end of your business name.
As with so many other things, starting an LLC for your business isn’t free. While the startup costs can be relatively cheap, the amount will vary from state to state.
Here’s where things get tricky for military spouses.
Yes, LLCs can streamline and protect the day-to-day financial considerations of your business. However, the devil is in the details when you PCS frequently.
Your state will likely require you to pay initial filing fees as well as annual taxes on your LLC. Milspouses, sing along if you know the words: these differ depending on the state where you’re stationed.
The Rules Vary
It isn’t just the tax rates that can change on you. Each state has its own laws, rules, and requirements surrounding LLCs.
For example, if you have a professional license, you may be able to start something called a Professional Limited Liability Company (PLLC), but it’s contingent on where you live. In California, you may not have a PLLC at all. Conversely, PLLCs are allowed in Colorado, but only for specific professional services; the same is true in Idaho.
As you move from state to state, you will have to research the requirements governing LLCs in your new home.
LLCs Can Be Worth It, Depending On Where You Live
Clearly, LLCs have benefits and drawbacks. They can be a really good thing, depending on your business type, its needs and requirements. As with so many other issues that touch on military spouse employment, however, LLCs come with additional drawbacks for military spouses.
There’s no question you will need to do your homework before forming your LLC or moving it to another state. Fortunately, informational resources exist to help military spouses. Ultimately, though, your best bet is to talk to an attorney about what you need to do and how to go about it.
When you’re contemplating the time, money, and effort you need to put in to create an LLC for your business, always keep the benefits in mind. As with military life itself, being military spouse entrepreneur comes with challenges, but it also comes with rewards.