As if starting a business wasn’t challenging enough, trying to figure out whether or not you should incorporate your business and make it an “LLC” can be an extra-added headache you never imagined.
Let’s take a step back. Wondering what the heck an LLC is and why you may or may not need it. You’re not alone.
According to Peter Alizio, a New York CPA and ESQ, an LLC is the abbreviation for Limited Liability Company, which offers the company protection with the flexibility of a partnership.
Still confused whether or not your company should become an LLC? Take note of what these accountants say the pros and cons are of incorporation and filing for taxes as an LLC.
Photo Courtesy of Entity Magazine
1. You Get Protection
When you start a company, it may be important to take your personal self out of the potential debts and liability of the company, so that you don’t destroy your personal piggy bank. If your company goes bankrupt or someone sues, your personal assets are kept out of the drama.
“Having limited liability protection is especially important if the person forming the business has a lot of assets to protect or if the business naturally has high risks associated with it (such as businesses in the health or food space),” says Pamela Kornblatt, the President of Tax Strategists, an accounting firm that provides personalized tax preparation and advice to startups, entrepreneurs, corporations and individual.
Photo Courtesy of The Balance
2. You Can Skip Corporate Formalities
One thing you can delete from your to-do list if you become an LLC is the need to deal with corporate formalities that might not be present with your business or something you need to do in order to keep the lights on.
“An LLC will not have to deal with corporate formalities i.e. board of directors or annual meetings. Instead the LLC is managed by an Operating Agreement, which is similar to that of a partnership agreement,” says Alizio.
3. Your Tax Situation Won’t Be Complicated
There is also a giant tax benefit when you decide to become an LLC. Think filing personal taxes is a giant Advil-Immune headache? Filling personal taxes and taxes for your business may be extra complicated. But becoming an LLC can streamline your taxes, especially if the LLC only has one member.
“For tax purposes, a one person LLC is called a "disregarded entity" (which means exactly what it sounds like it means, for the purpose of taxes the government disregards the fact that you have an entity),” says Kornblatt. “Rather than having a separate tax return as in the case of a corporation or partnership, a one member LLC is reported as part of the personal tax return (on a Schedule C) in the same way it would be reported if it were simply a sole proprietorship. As a result, a one person LLC results in less work for a person who prepares their own taxes and lower accounting costs if using a professional tax preparer.”
1. Your Taxes Might Raise the Roof
There’s a catch, of course, to your taxes. This is why it may be important to know that becoming an LLC is not your only option when It comes to selecting a formation for your business.
“While an LLC avoids the dreaded "double taxation" of a C-corp, income generated through the LLC is subject to self employment tax (a whopping 15.3%!),” says Kornblatt. “With an S-corp structure, an owner providing services must receive a "reasonable salary" subject to payroll taxes (in the place of self employment taxes) but any excess profits over and above the salary are not subject to self employment taxes. This can make for significantly lower taxes for some S-corps versus LLCs making the same net profit.”
2. The IRS May Come Knocking
Having a business on your personal return may be a flag for the IRS to audit you, which is why when you have a business, it is important to stay organized and keep all receipts.
“Having a business on a personal tax return, whether a sole proprietorship or one member LLC automatically increases the risk of the tax return being audited,” says Kornblatt. “Especially since a lot of business owners do not keep adequate records (keep your receipts!), the IRS is especially fond of asking for documentation to back up expenses claimed on a return. This risk increases as the income earned by the LLC increases. Corporations (S or C) of similar sizes have much lower audit rates. “
3. Investors Might Roll Their Eyes
If you are looking for potential investors, establishing your company as an LLC may not be the best move.
“For entrepreneurs who may be looking to raise capital, an LLC may not be the right fit as many investors prefer corporate business structures, says Kornblatt.
Gender divisions in sports have primarily served to keep women out of what has always been believed to be a male domain. The idea of women participating alongside men has been regarded with contempt under the belief that women were made physically inferior.
Within their own division, women have reached new heights, received accolades for outstanding physical performance and endurance, and have proven themselves to be as capable of athletic excellence as men. In spite of women's collective fight to be recognized as equals to their male counterparts, female athletes must now prove their womanhood in order to compete alongside their own gender.
That has been the reality for Caster Semenya, a South African Olympic champion, who has been at the center of the latest gender discrimination debate across the world. After crushing her competition in the women's 800-meter dash in 2016, Semenya was subjected to scrutiny from her peers based upon her physical appearance, calling her gender into question. Despite setting a new national record for South Africa and attaining the title of fifth fastest woman in Olympic history, Semenya's success was quickly brushed aside as she became a spectacle for all the wrong reasons.
Semenya's gender became a hot topic among reporters as the Olympic champion was subjected to sex testing by the International Association of Athletics Federations (IAAF). According to Ruth Padawer from the New York Times, Semenya was forced to undergo relentless examination by gender experts to determine whether or not she was woman enough to compete as one. While the IAAF has never released the results of their testing, that did not stop the media from making irreverent speculations about the athlete's gender.
Moments after winning the Berlin World Athletics Championship in 2009, Semenya was faced with immediate backlash from fellow runners. Elisa Cusma who suffered a whopping defeat after finishing in sixth place, felt as though Semenya was too masculine to compete in a women's race. Cusma stated, "These kind of people should not run with us. For me, she is not a woman. She's a man." While her statement proved insensitive enough, her perspective was acknowledged and appeared to be a mutually belief among the other white female competitors.
Fast forward to 2018, the IAAF issued new Eligibility Regulations for Female Classification (Athlete with Differences of Sexual Development) that apply to events from 400m to the mile, including 400m hurdles races, 800m, and 1500m. The regulations created by the IAAF state that an athlete must be recognized at law as either female or intersex, she must reduce her testosterone level to below 5 nmol/L continuously for the duration of six months, and she must maintain her testosterone levels to remain below 5 nmol/L during and after competing so long as she wishes to be eligible to compete in any future events. It is believed that these new rules have been put into effect to specifically target Semenya given her history of being the most recent athlete to face this sort of discrimination.
With these regulations put into effect, in combination with the lack of information about whether or not Semenya is biologically a female of male, society has seemed to come to the conclusion that Semenya is intersex, meaning she was born with any variation of characteristics, chromosomes, gonads, sex hormones, or genitals. After her initial testing, there had been alleged leaks to media outlets such as Australia's Daily Telegraph newspaper which stated that Semenya's results proved that her testosterone levels were too high. This information, while not credible, has been widely accepted as fact. Whether or not Semenya is intersex, society appears to be missing the point that no one is entitled to this information. Running off their newfound acceptance that the Olympic champion is intersex, it calls into question whether her elevated levels of testosterone makes her a man.
The IAAF published a study concluding that higher levels of testosterone do, in fact, contribute to the level of performance in track and field. However, higher testosterone levels have never been the sole determining factor for sex or gender. There are conditions that affect women, such as PCOS, in which the ovaries produce extra amounts of testosterone. However, those women never have their womanhood called into question, nor should they—and neither should Semenya.
Every aspect of the issue surrounding Semenya's body has been deplorable, to say the least. However, there has not been enough recognition as to how invasive and degrading sex testing actually is. For any woman, at any age, to have her body forcibly examined and studied like a science project by "experts" is humiliating and unethical. Under no circumstances have Semenya's health or well-being been considered upon discovering that her body allegedly produces an excessive amount of testosterone. For the sake of an organization, for the comfort of white female athletes who felt as though Semenya's gender was an unfair advantage against them, Semenya and other women like her, must undergo hormone treatment to reduce their performance to that of which women are expected to perform at. Yet some women within the athletic community are unphased by this direct attempt to further prove women as inferior athletes.
As difficult as this global invasion of privacy has been for the athlete, the humiliation and sense of violation is felt by her people in South Africa. Writer and activist, Kari, reported that Semenya has had the country's undying support since her first global appearance in 2009. Even after the IAAF released their new regulations, South Africans have refuted their accusations. Kari stated, "The Minister of Sports and Recreation and the Africa National Congress, South Africa's ruling party labeled the decision as anti-sport, racist, and homophobic." It is no secret that the build and appearance of Black women have always been met with racist and sexist commentary. Because Black women have never managed to fit into the European standard of beauty catered to and in favor of white women, the accusations of Semenya appearing too masculine were unsurprising.
Despite the countless injustices Semenya has faced over the years, she remains as determined as ever to return to track and field and compete amongst women as the woman she is. Her fight against the IAAF's regulations continues as the Olympic champion has been receiving and outpour of support in wake of the Association's decision. Semenya is determined to run again, win again, and set new and inclusive standards for women's sports.