Learn About the Advantages of Organizing as an LLC

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Anybody interested in starting a new business, or in formalizing the organization of an existing sole proprietorship, should pay careful attention to the entity selection decisions they will need to make. An experienced business law attorney can guide you through the considerations that will affect your decision to form a C corporation, an S corporation, a limited liability company (LLC), any form of partnership, or stay with a sole proprietorship in your own name.

Though they are relatively new in the United States, LLCs have emerged as a highly popular and flexible way of organizing a new business entity. Virtually unknown in this country 40 years ago, LLCs can be formed today in every state, and in some industries, they represent the standard form of business organization.

Flexibility and Ease of Formation

Although the details vary from state to state, an LLC combines certain features of the business partnership and the business corporation. The personal liability of an LLC’s members is protected in much the same way that a corporation shelters its shareholders from liability. Unlike corporations, however, most LLCs are taxed on a pass-through basis to its individual members. In other words, the LLC pays no taxes on its profits, but each member pays income tax on his or her share.

Perhaps the main advantage of the LLC is its flexibility in organization and management. Corporations and partnerships alike are free to vary many of the state laws related to corporate and partnership governance through corporate bylaws and partnership agreements, but the level of default statutory regulation applicable to LLCs is very limited. An operating agreement defines the rights and responsibilities of the membership, and creating an LLC is as simple as filing a certificate of organization (Pennsylvania) or certificate of formation (New Jersey) together with a modest filing fee.

Unlike corporations, LLCs are not managed by boards of directors with specific duties and responsibilities.  Instead, the management functions of an LLC are spelled out in the operating agreement. When the LLC has more than one member, the operating agreement can also spell out details as to the transferability of interests, rights of first refusal and restrictive covenants with respect to proprietary information, customer lists and noncompetition terms.

Tax Election Options for LLCs

Some entrepreneurs or existing businesses might find the tax characteristics of an LLC to be disadvantageous. Because the LLC itself is not taxed, distributions to members are taxed as ordinary income to the individuals. For most startups, however, this will represent no practical difference from self-employment tax. LLCs can also elect to be taxed in any of several ways: sole proprietorship, S corporation, or if there are multiple members, as a C corporation or partnership. LLCs seeking corporate tax treatment can set up a Simple IRA retirement plan and pay themselves a reasonable salary to reduce some of their self-employment tax that they would incur as a sole proprietorship.

When the primary impetus for organizing as an LLC is to shelter personal assets from business liability, the limited liability company form is hard to beat. Many real estate companies, property investment and management firms set up a separate LLC for each building, to ensure that the tort or contract liability for each project is contained to the asset value of that property. The LLC elect to be taxed as partnerships are taxed with the general partner organized as a corporation or another LLC.

Contact Spadea & Associates, LLC in Ridley Park: 610-521-0604

Any business entity selection and formation decision should be based on your own personal and business objectives, needs and characteristics. The Law Offices of Spadea & Associates works with business owners and entrepreneurs in Greater Philadelphia, southeastern Pennsylvania and South Jersey on matters of business law, tax law and estate planning. To learn more about the ways an LLC could meet your objectives in Pennsylvania or New Jersey, contact us in Ridley Park.

Why Should I Have a Will?

A will is the starting point of any good estate plan. A will is a legal document that directs how your estate is administered and allows distribution of your assets to your named beneficiaries and contingent beneficiaries after your death. A properly drafted will protects your family by helping them meet their future financial needs after your death. A will minimizes your taxes by reducing the size of your taxable estate. Having a will also avoids intestacy proceedings to determine how your estate should be distributed. Having a will also avoids your beneficiaries from posting a bond to probate your estate. It is very important to name an executor who is responsible for settling the estate, filing all the inheritance tax, estate tax and income tax returns and carrying out the provisions of the Will.

It also enables you and your spouse to set up a testamentary trust for your children if you both were to die at the same time. You would also name a trustee that would watch over the trust assets and distribute them to pay for support, education and maintenance of your children until they reach twenty five or any age you and your spouse deem appropriate. A will allows you to name a guardian to raise minor children, which avoids having the Orphans Court appoint a guardian based on the information it can gather after you and your spouse die.

You can state in your will that you may leave a memorandum suggesting the distribution of certain personal items that you want distributed after your death such as jewelry, china, coin collections, memorabilia, tools or golf clubs etc. You can avoid potential conflict by leaving a signed and dated list with your will explaining who should get these personal items.

You should consider updating your will if any of the following occur:

1. Substantial increase or decrease in your estate assets.
2. You retire or sell your residence.
3. If you get married or get divorced.
4. Any new births or deaths in your family.
5. You move to another state or country.
6. You start a business, add a partner or terminate one.
7. The federal estate tax or income tax laws change.
However, a will only covers assets in your name. It does not cover jointly owned assets or assets with named beneficiaries such as retirement or brokerage accounts. Therefore you should regularly update your beneficiary designations on those types of accounts.
The most important thing a will gives you is peace of mind knowing that your family and loved ones are taken care of.

Welcome to the Law Offices of Spadea & Associates

At the law offices of Spadea & Associates, LLC, in Ridley Park, we have extensive experience representing individuals throughout Delaware County, Montgomery County, Philadelphia County and South Jersey. We place a high priority on personal service, ensuring that all your legal concerns are handled directly by Gregory J. Spadea or one of his associates. Before starting his own law practice in 2001, attorney Spadea was a former IRS agent and certified public accountant. Contact our offices to set up a free initial consultation.

We focus our practice on several areas of practice, including:

• Estate and tax planning: We provide advice to individuals and businesses, counseling clients and families on strategies to ensure the orderly distribution of assets at death. We also help businesses and individuals make plans to minimize their income and inheritance tax obligations.
• Estate administration and will probate: We guide you through the probate and estate administration process in as seamless a manner as possible, ensuring your responsibilities are met appropriately.
• Business law and entity formation: We work with startups to identify appropriate business structure and provide comprehensive corporate governance. We draft and review contracts and commercial leases.
• Criminal defense: Our criminal defense attorneys represent men and women who have been charged with a crime. We offer skilled criminal defense services to people charged with white collar crimes, felonies, misdemeanors, DUI (driving under the influence) and traffic violations.
• Real estate transactions and evictions: We handle all matters related to the sale or purchase of commercial or residential real estate, from the negotiation of terms to the closing. We prepare all documents necessary to successfully complete a real estate transaction, including buy-sell agreements and deeds.
• Personal injury: Our firm represents injured individuals and families in a wide range of personal injury cases, including car accidents, truck accidents, motorcycle crashes, medical malpractice, slip-and- fall and wrongful death, among others.
• Family law: We work closely with clients to deal with family law issues as efficiently and effectively as possible. Some of the types of family law cases we handle include divorce, child support, child custody, property division and spousal support.
• Immigration law: Our attorneys are mindful of the timeframes of immigration processes as we help our clients come to the United States for work, obtain lawful permanent resident status and work toward other immigration goals.

For a free initial consultation with an experienced lawyer, contact us. We are conveniently located across from Taylor Hospital.

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