What do I need to do to form an LLC?

Question

I have few questions regarding forming an LLC in Virginia. I'm a web-app developer. I have been working as a freelancer for 2 years. Now, I consider to form an LLC. But I have no knowledge in business field, thus if anyone experienced, please help me to answer few questions below.

1. I know that there are a lot service on the internet helping to form an LLC online with a fee around $49. Is it neccessarry to pay them to have an LLC or I can do that myself?

2. What I need to know and what I need to do before forming an LLC?

3. Is it possible if I hire some employees who living in India? Is the salary for my employees a expense? Do I need to claim this expense?

4. What I need to do to protect my company?

5. What can I do to reduce taxes?

6. What I need to know after forming an LLC?

Thank you.

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I found the question #3 answered by an expert here

When you pay a foreign contractor for work they performed for you, as long as the work was performed entirely in the foreign country, then the foreign person is not liable for any tax here in the United States. That being the case, you are not required to withhold any taxes or send them any forms.

As long as you have documentation of the money you paid to these individuals, such as a cancelled check, bank record of a wire transfer, etc., you will be able to claim this deduction without any problems. All deductions that you claim do not necessarily require a form 1099 or similar documentation to be deductible. As an example, if you hired an independent contractor here in the US to do work for you, and that contractor also had his own corporation established, then the payments you made to him would not require that a 1099 be issued, but you can still deduct the payments. All you really need to have is an invoice from the foreign source showing the details of and charges for the services they performed and a record of your payment.

Answer 1

I know that there are a lot service on the internet helping to form an LLC online with a fee around $49. Is it neccessarry to pay them to have an LLC or I can do that myself?

No, you can do it yourself. The $49 is for your convenience, but there's nothing they can do that you wouldn't be able to do on your own.

What I need to know and what I need to do before forming an LLC?

You need to know that LLC is a legal structure that is designed to provide legal protections. As such, it is prudent to talk to a legal adviser, i.e.: a Virginia-licensed attorney.

Is it possible if I hire some employees who living in India? Is the salary for my employees a expense? Do I need to claim this expense?

This, I guess, is entirely unrelated to your questions about LLC. Yes, it is possible. The salary you pay your employees is your expense. You need to claim it, otherwise you'd be inflating your earnings which in certain circumstances may constitute fraud.

What I need to do to protect my company?

For physical protection, you'd probably hire a security guard. If you're talking about legal protections, then again - talk to a lawyer.

What can I do to reduce taxes?

Vote for a politician that promises to reduce taxes. Most of them never deliver though. Otherwise you can do what everyone else is doing - tax planning. That is - plan ahead your expenses, time your invoices and utilize tax deferral programs etc. Talk to your tax adviser, who should be a EA or a CPA licensed in Virginia.

What I need to know after forming an LLC?

You'll need to learn what are the filing requirements in your State (annual reports, tax reports, business taxes, sales taxes, payroll taxes, etc). Most are the same for same proprietors and LLCs, so you probably will not be adding to much extra red-tape. Your attorney and tax adviser will help you with this, but you can also research yourself on the Virginia department of corporations/State department (whichever deals with LLCs).

Answer 2

You can file an LLC yourself in most states, although it might be helpful to use a service if you're not sure what to do to ensure it is correct. I filed my LLC here in Colorado online with the Secretary of State's office, which provided the fill-in-the-blank forms and made it easy.

In the U.S., taxation of an LLC is "pass-through", meaning the LLC itself does not have any tax liability. Taxes are based on what you take out of the LLC as distributions to yourself, so you pay personal income tax on that.

There are many good books on how to form and then operate an LLC, and I personally like NoLo (link to their web site) because they cater to novices.

As for hiring people in India, I can't speak to that, so hopefully someone else can answer that specific topic.

As for what you need to know about how to run it, I'll refer back to the NoLo books and web site.