On July 1st, 2015, the Indiana Business Flexibility Act, or IBFA, became a state regulation. The law is intended to give businesses more flexibility and to make forming or reorganizing a firm easier. Indiana Code Title 23, which defines the legislation pertaining to businesses and other organizations in the state, contains the IBFA.
When founding a corporation, business owners have access to a larger selection of organizational structures thanks to the IBFA. This includes the choice to establish a “series LLC,” a type of limited liability company (LLC) that enables the establishment of numerous “series” inside the business. For companies with many business lines or those that wish to split liability for various operations, the ability for each series to have its own assets, liabilities, and members offers greater flexibility.
In terms of company structures, limited liability companies combine the advantages of corporations and partnerships. Owners of LLCs have limited liability protection, which protects their personal assets in the case of a lawsuit or other legal action brought against the firm. LLCs are reasonably simple to create and administer. Additionally, LLCs are subject to pass-through taxes, which means that earnings and losses are reported on the owners’ individual tax returns rather than at the company level.
Although LLCs have many advantages, there are a few drawbacks to take into account. One example is that LLCs must pay self-employment taxes, which may be more expensive than the taxes paid by conventional corporations. Furthermore, because banks and other lenders could consider LLCs to be less stable than corporations, they might find it challenging to raise funds or obtain loans.
In general, the IBFA and the utilization of LLCs can give firms more security and flexibility. But before making a choice, it’s crucial for business owners to carefully weigh the benefits and drawbacks of each organizational structure. Working with a business lawyer or other expert can also help guarantee that the structure selected is the finest fit for a certain business’s requirements and objectives.
Limited liability companies, or LLCs, are often taxed as pass-through entities, which means that the LLC’s gains and losses are distributed to the owners and reported on each of their individual tax returns. According to the state in which it was created and whether it chose to be treated as a corporation, an LLC’s specific tax treatment, however, may vary. To get advice on the tax repercussions of creating and running an LLC, it is advised to speak with a tax expert.
You have a few options for paying yourself as an LLC owner:
1. Draw: You are permitted to withdraw funds from the LLC’s account. Payroll taxes are not applied because this is not regarded as a salary or wage.
2. wage: As an LLC employee, you may pay yourself a wage. Taxes must be withheld, and payroll taxes must be paid.
3. Distributions: The LLC’s earnings may be distributed to you. Distributions are liable to income taxes even if they are not considered wages and are therefore exempt from payroll taxes.
The Indiana Business Flexibility Act does not specify how LLC owners must remunerate themselves, which is an important point to remember. The operating agreement of the LLC shall govern Owners’ compensation.