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.
For decades, women have been unknowingly suffering from PSD and intergenerational trauma, but now Dr. Valerie Rein wants women to reclaim their power through mind, body and healing tools.
As women, no matter how many accomplishments we have or how successful we look on the outside, we all occasionally hear that nagging internal voice telling us to do more. We criticize ourselves more than anyone else and then throw ourselves into the never-ending cycle of self-care, all in effort to save ourselves from crashing into this invisible internal wall. According to psychologist, entrepreneur and author, Dr. Valerie Rein, these feelings are not your fault and there is nothing wrong with you— but chances are you definitely suffering from Patriarchy Stress Disorder.
Patriarchy Stress Disorder (PSD) is defined as the collective inherited trauma of oppression that forms an invisible inner barrier to women's happiness and fulfillment. The term was coined by Rein who discovered a missing link between trauma and the effects that patriarchal power structures have had on certain groups of people all throughout history up until the present day. Her life experience, in addition to research, have led Rein to develop a deeper understanding of the ways in which men and women are experiencing symptoms of trauma and stress that have been genetically passed down from previously oppressed generations.
What makes the discovery of this disorder significant is that it provides women with an answer to the stresses and trauma we feel but cannot explain or overcome. After being admitted to the ER with stroke-like symptoms one afternoon, when Rein noticed the left side of her body and face going numb, she was baffled to learn from her doctors that the results of her tests revealed that her stroke-like symptoms were caused by stress. Rein was then left to figure out what exactly she did for her clients in order for them to be able to step into the fullness of themselves that she was unable to do for herself. "What started seeping through the tears was the realization that I checked all the boxes that society told me I needed to feel happy and fulfilled, but I didn't feel happy or fulfilled and I didn't feel unhappy either. I didn't feel much of anything at all, not even stress," she stated.
Photo Courtesy of Dr. Valerie Rein
This raised the question for Rein as to what sort of hidden traumas women are suppressing without having any awareness of its presence. In her evaluation of her healing methodology, Rein realized that she was using mind, body and trauma healing tools with her clients because, while they had never experienced a traumatic event, they were showing the tell-tale symptoms of trauma which are described as a disconnect from parts of ourselves, body and emotions. In addition to her personal evaluation, research at the time had revealed that traumatic experiences are, in fact, passed down genetically throughout generations. This was Rein's lightbulb moment. The answer to a very real problem that she, and all women, have been experiencing is intergenerational trauma as a result of oppression formed under the patriarchy.
Although Rein's discovery would undoubtably change the way women experience and understand stress, it was crucial that she first broaden the definition of trauma not with the intention of catering to PSD, but to better identify the ways in which trauma presents itself in the current generation. When studying psychology from the books and diagnostic manuals written exclusively by white men, trauma was narrowly defined as a life-threatening experience. By that definition, not many people fit the bill despite showing trauma-like symptoms such as disconnections from parts of their body, emotions and self-expression. However, as the field of psychology has expanded, more voices have been joining the conversations and expanding the definition of trauma based on their lived experience. "I have broadened the definition to say that any experience that makes us feel unsafe psychically or emotionally can be traumatic," stated Rein. By redefining trauma, people across the gender spectrum are able to find validation in their experiences and begin their journey to healing these traumas not just for ourselves, but for future generations.
While PSD is not experienced by one particular gender, as women who have been one of the most historically disadvantaged and oppressed groups, we have inherited survival instructions that express themselves differently for different women. For some women, this means their nervous systems freeze when faced with something that has been historically dangerous for women such as stepping into their power, speaking out, being visible or making a lot of money. Then there are women who go into fight or flight mode. Although they are able to stand in the spotlight, they pay a high price for it when their nervous system begins to work in a constant state of hyper vigilance in order to keep them safe. These women often find themselves having trouble with anxiety, intimacy, sleeping or relaxing without a glass of wine or a pill. Because of this, adrenaline fatigue has become an epidemic among high achieving women that is resulting in heightened levels of stress and anxiety.
"For the first time, it makes sense that we are not broken or making this up, and we have gained this understanding by looking through the lens of a shared trauma. All of these things have been either forbidden or impossible for women. A woman's power has always been a punishable offense throughout history," stated Rein.
Although the idea of having a disorder may be scary to some and even potentially contribute to a victim mentality, Rein wants people to be empowered by PSD and to see it as a diagnosis meant to validate your experience by giving it a name, making it real and giving you a means to heal yourself. "There are still experiences in our lives that are triggering PSD and the more layers we heal, the more power we claim, the more resilience we have and more ability we have in staying plugged into our power and happiness. These triggers affect us less and less the more we heal," emphasized Rein. While the task of breaking intergenerational transmission of trauma seems intimidating, the author has flipped the negative approach to the healing journey from a game of survival to the game of how good can it get.
In her new book, Patriarchy Stress Disorder: The Invisible Barrier to Women's Happiness and Fulfillment, Rein details an easy system for healing that includes the necessary tools she has sourced over 20 years on her healing exploration with the pioneers of mind, body and trauma resolution. Her 5-step system serves to help "Jailbreakers" escape the inner prison of PSD and other hidden trauma through the process of Waking Up in Prison, Meeting the Prison Guards, Turning the Prison Guards into Body Guards, Digging the Tunnel to Freedom and Savoring Freedom. Readers can also find free tools on Rein's website to help aid in their healing journey and exploration.
"I think of the book coming out as the birth of a movement. Healing is not women against men– it's women, men and people across the gender spectrum, coming together in a shared understanding that we all have trauma and we can all heal."