Limited Liability Company Lawyers for Mesa, Arizona

If your single-member LLC’s S corporation election (Form 2553) is accepted and effective for the tax year, you don’t use Schedule C for that business. You file Form 1120-S for the entity, issue yourself a Schedule K-1 (Form 1120-S), and report the K-1 items on your Form 1040 (typically on Schedule E). If the election isn’t effective for the year in question (for example, it was filed late and not granted relief), you remain a disregarded entity for that year and would report on Schedule C instead. What this means for your filings this year File Form 1120-S by the 15th day of the third month after the end of your tax year (March 15 for a calendar-year S corp). Provide yourself a shareholder K-1. On your personal return, include K-1 income, deductions, and credits; don’t duplicate the same activity on Schedule C. Keep the IRS approval of your S election with your permanent records and verify the effective date before you prepare the return. Where Schedule C still applies (edge cases) If your 2553 wasn’t accepted or the effective date falls after the start of the year, the pre-election period is still disregarded-entity activity. In a mid-year effective-date situation, you’ll generally have two “periods”: a Schedule C period before the S election takes effect and an 1120-S period after. If your 2553 was late, consider Rev. Proc. 2013-30 relief so you can treat the election as timely and avoid an unintended Schedule C year. Payroll and “reasonable compensation” Once you’re taxed as an S corporation, you’re both owner and employee if you perform services. Pay yourself reasonable compensation through payroll and issue a W-2. That means registering for payroll, withholding and depositing employment taxes, filing Form 941 quarterly and Form 940 annually (where applicable), and following Publication 15 for rates and deposit rules. Non-wage distributions can be taken in addition to wages, but they come after paying reasonable compensation. Practical example Assume your 2553 was accepted effective January 1, 2025. For 2025 you run payroll to pay yourself reasonable wages, file 1120-S by March 17, 2026 (March 15, 2026 is a Sunday), and issue yourself a K-1. On your 2025 Form 1040 you include W-2 wages from your S corp and the Schedule E entry from your K-1. You do not file a Schedule C for that LLC. If the IRS letter shows an effective date of July 1, 2025, you’d generally report Jan–Jun activity on Schedule C and Jul–Dec on 1120-S unless you secure late-election relief aligning the election to January 1. State and local considerations Many states require separate S-corporation or franchise filings, estimated payments, or annual fees even if there’s no entity-level income tax. Check your state’s S-corp conformity, filing thresholds, and due dates. For payroll, also register with your state workforce and revenue agencies and follow state deposit and return schedules. Common pitfalls to avoid Don’t file 1120-S unless your S election is actually in effect; the IRS typically sends Notice CP261 confirming acceptance. Don’t skip payroll or set wages unreasonably low relative to your role. Don’t double-report the same activity on both Schedule C and your K-1. Finally, don’t overlook shareholder basis tracking; it affects loss deductibility and the taxability of distributions. Records and elections to keep on file Retain your filed Form 2553 and acceptance notice, EIN assignment letter, payroll registrations, quarterly and annual payroll returns, shareholder basis schedules, minutes/consents approving compensation, and any correspondence related to late-election relief. The Final Analysis Once your single-member LLC elects S corporation status, Form 1120-S becomes mandatory and Schedule C is no longer an option. Stay on top of payroll, compensation, and recordkeeping, and you’ll be in compliance. If you’re unsure about the details, a CPA experienced with small S corps can keep you on track and help you capture the full tax benefits.

Membership interests in an LLC are considered the personal property of the interests holders. As such, you will need to include clauses in which you specifically name beneficiaries for those membership interests upon death of the interests holders. You may additionally need to include procedures for transfer (for example through membership certificates).

Yes, any document that lays out the rights and responsibilities of parties should be drafted by an attorney DISCLAIMER The answers to these questions do not constitute legal advice and does not create an attorney-client relationship with the attorney and anyone who reviews these responses.

Hello! In my experience, it is often extremely helpful to have an operating agreement. An OA is generally not required by law; however, there are significant benefits: 1. You and your partners can be clear on the terms of ownership of shares, voting, and what happens in a dissolution. 2. Even if you are a sole operator, if you ever intend to sell the business, having an OA appears more professional; and 3. In the event of your incapacity or death, the OA will still be binding nevertheless, making it easier for any guardians to protect your wishes. On my page, you can find a package I offer to draft operating agreements - https://app.contractscounsel.com/lawyer/my-profile/check#Packages Best of luck!

If you're planning to invest in New York real estate with your husband and your brother, forming an LLC is probably the smartest move. It protects each of you from personal liability and keeps the ownership structure clean and manageable. Why an LLC Makes the Most Sense Think of an LLC as a legal shield. If something goes wrong, like someone gets injured on the property or the business gets sued, your personal assets (your home, savings, or personal bank accounts) are generally protected. That protection applies to all three of you equally. It also fits well with your ownership plan. Your brother can own 50 percent, while you and your husband split the remaining 50. Since New York doesn’t treat spousal property as community property by default, you'd each be listed as separate members. You could each hold 25 percent, or adjust that based on how much you're each putting in, whether financially or through work. On the tax side, an LLC is treated as a pass-through entity by default. That means the LLC itself doesn’t pay federal income tax. Instead, profits or losses flow directly to each of you based on ownership percentage, and you report that on your personal returns. This avoids the double taxation you’d run into with a corporation. What to Include in the Operating Agreement This is your internal rulebook. When family is involved, having a clear operating agreement is even more important. It keeps everything on record and helps avoid confusion or conflict down the line. You'll want to spell out everyone's ownership percentages, who’s contributing what — whether that’s cash, property, or services — and what each person is responsible for going forward. Decision-making rules are key here. Will you need unanimous agreement for big moves like selling the property? Can day-to-day issues be handled with a simple majority vote? You’ll also want to decide whether voting power should match ownership percentages or whether each person should get an equal vote regardless of their share. You should also cover how profits will be distributed, who’s managing the property or finances, and what happens if someone wants out. A buy-sell clause is a must. It explains how to value someone’s stake and who has the first right to buy if a member decides to exit or passes away. How to Form the LLC in New York To get started, you’ll need to file Articles of Organization with the New York Department of State. This includes basic information like the LLC’s name (which must include “LLC” or “Limited Liability Company”), its address, and your registered agent. The filing fee is around $200. One thing to be aware of is New York’s publication requirement. Within 120 days of formation, you’re required to publish a notice in two newspapers (one daily and one weekly) in the county where your office is based. This can cost anywhere from $1,000 to $2,000, depending on the county. New York City tends to be the most expensive. You’ll also need an EIN from the IRS. Even if you don’t plan to hire employees, you’ll need one to open a business bank account and file your taxes. Be sure to keep the LLC’s finances separate from personal ones. Commingling funds is one of the quickest ways to lose your liability protection. Why Other Options Don’t Stack Up A general partnership is easy to set up but offers no liability protection. That’s a big risk when you’re dealing with rental property or tenants. Limited partnerships require at least one general partner with full liability, which kind of defeats the purpose of forming an entity in the first place. S-corporations give you liability protection, but they come with tight restrictions. Most notably, profits have to be distributed strictly according to ownership percentages. That can be limiting if, say, one person is actively managing the property and should be compensated differently. C-corporations give the strongest liability protection, but they come with double taxation — once at the corporate level and again when you distribute profits to shareholders. For a real estate investment, that’s usually not worth it. Protecting Yourselves Beyond the LLC Forming an LLC is an important first step, but it shouldn’t be your only line of defense. You’ll want to carry solid insurance coverage, including general liability and property insurance. Many investors also add umbrella coverage (often $1 to $2 million) for additional peace of mind. If you plan to buy more than one property, it’s worth considering a separate LLC for each one. This prevents a legal or financial problem at one property from putting your entire portfolio at risk. It’s more paperwork and a bit more cost, but the added protection is usually worth it for serious investors. Also, stay organized. Even though LLCs don’t require strict corporate formalities, it’s smart to document big decisions and hold regular check-ins with all members. This keeps the business side of things separate from your personal relationships and helps prevent misunderstandings. Why You Need a Lawyer and a CPA Setting up a basic LLC isn’t too difficult, but because this involves family, money, and property, it’s smart to bring in professional help. A business attorney who knows New York real estate can draft an operating agreement that fits your situation and helps avoid trouble later. You’ll also want to talk to a CPA. They can walk you through tax strategies, depreciation, and how to maximize your deductions. If estate planning is something you’re thinking about, this is a good time to start looking at how LLC membership fits into your broader plan for wealth transfer.