Why an LLC you ask?

I recently received an email from an out of state AMSOIL dealer. He had run across one of my websites, or possibly this blog and had a few questions for me. I returned his email and then thought to myself that if he had these questions, maybe others did as well.

I thought I would simply copy below the email that I had sent to him. His main question was why I choose an LLC over just running by business under my social security number and being a sole-proprietor. Here is my response. As always, if you have any questions or would like to discuss this further, please use the comments section!

Hi XXX,

Welcome to AMSOIL and thanks for the email – I’m happy to hear that you are off to a good start. I agree most dealers out there are only concerned about signing up new dealers under them, once you sign up you hardly ever hear from them again – sad but true fact. This is how I differentiate myself from other AMSOIL dealers, I help my down-line dealers every step of the way from start to finish, regardless of their sales. I have dealers all over the country that I have helped set up their AMSOIL business. Have you asked these questions of your sponsoring dealer?

I’m glad to hear you are currently using QuickBooks, that’s a great first start. Having your business set up as a sole proprietorship is just fine, and fairly common. You can always form an LLC later on, after you are certain that this business is for you. There are no official requirements to form an LLC but there are the advantages (over other types of entities) worth mentioning.

I find that there are three main advantages of an LLC. The first is the fact that the owners (members) have limited personal liability - limited liability for the debts and actions of the LLC. With a sole proprietorship, your personal assets are not protected and you are responsible along with your business entity’s assets for any debt or actions of your company. Secondly, any income is passed through the entity into your personal tax return – there is no “double taxation” as in a corporation. You have a choice with the IRS as to how you would like your LLC taxed, as a partnership, a corporation, or most commonly as a sole-proprietorship. Lastly, an LLC is quick and easy to set up and allows for single or multiple member ownership. You don’t have to have an attorney create any expensive charters or agreements. I can set up an LLC and obtain a federal ID number in under fifteen minutes!

Since you are using QuickBooks, they have a few samples of good Chart of Accounts that you may use. A lot of the actual accounts won’t pertain to you, so you can simply delete those accounts. I don’t like the inventory module in QB, so I have created my own in Excel. I then just adjust the General Ledger on a monthly basis to reflect my current inventory cost. Shoot me an email if you don’t know how to categorize a transaction.

I have written a document awhile back to help business owners in setting up their business, it’s geared toward someone who has not yet set up the business, but if you are still interested in this, shoot me an email and I will be happy to send you a pdf of it.

Hope this helps!

Mark Tojek