A limited liability corporation (LLC) is an excellent way to run a business with partners. Running such a firm in a no sales tax state such as Montana is a bonus. It will allow you to make purchases on big items such as vehicles without paying a sales tax. Montana is one of five states in the United States that have not implemented a sales tax, whereas most states have adopted this tax since the Great Depression. The following are the top 5 benefits of running an LLC without paying sales tax.
1. Save Thousands of Dollars
The most noticeable benefit of forming a Montana LLC is that you will save thousands of dollars on registering vehicles. Rates for license plates in Montana are also among the lowest in the nation. Whether you plan on purchasing a plane, RV, boat or car, you will be able save plenty of money that can be spent on other items.
For collectors of classic cars or new premium vehicles that cost six figures or more, this arrangement is ideal. You can save as much as $10,000, for example, on a new Ferrari. It's also a win for RV drivers who want to explore Montana's great outdoors. It's a particularly rewarding strategy for Tesla Model S drivers and other early adopters of green technology.
2. Accelerate the Registration Process
The turnaround time for registering vehicles in Montana is only a matter of days. The registration process that involves submitting your information, however, only takes five minutes. This same process in states like California can take much longer due to additional red tape. In Montana you won't have to be slowed down by a vehicle inspection, as your LLC will own the vehicle.
The sign-up process in Montana for registering vehicles simply involves submitting information such as the name of your LLC, a list of members who will use the vehicle, address and payment and a few other items. The filing fee for an LLC is only $70 in Montana, paid to the Secretary of State. The organizer of the company can list obligations of each member and present an optional operating agreement, but overall it's not complex. If the company has multiple members, you should consider getting an Employer Identification Number (EIN).
3. Reduce Your Liabilities
Like the name suggests, an LLC reduces your exposure to lawsuits should something go wrong with the business. You won't have to worry about your personal assets being put at risk, as lawsuits will be against your company, not you personally. In other words, you will be able to protect your personal assets in the event the company goes bankrupt.
One of the main financial benefits of an LLC is that individual members will not be held accountable for debts or losses incurred by the company. That means that creditors cannot seek claiming personal assets such as savings accounts or physical property of the members. Legally, an LLC is separate from its owners in terms of liability.
4. Control Your Business
Forming an LLC gives you plenty of freedom on how owners run the company. It does not have to be run like a publicly-traded corporation in which you have to comply with a vast amount of government regulations. Aside from submitting an annual report, your obligations as a company do not compare with corporations that are managed by a board of directors. You are free to create any organizational structure you want that is agreed upon by the members. Unlike a partnership, ownership shares can be divided with much more flexibility.
When your company has "LLC" after its name it has credibility in the eyes of the business community and consumers. It shows that you have commitment toward your business. Unlike an S Corporation, you will not have to deal with the restrictions involved with who can or cannot be an owner. An LLC gives owners flexibility in deciding if it is run by owners, managers or third party vendors.
While most corporations are required to keep track of minutes and meetings, an LLC is not bound by these rules. You will not be required to hold annual meetings. Ultimately, running an LLC is much less formal than running a C or S corporation.
5. Tax Benefits
There are multiple tax benefits for LLC owners, particularly for those who run a sole proprietorship. An LLC spells out how profits will be distributed to owners and how they will be taxed. Instead of being taxed as a partnership, the company may decide to be taxed as a corporate entity. Owners also have the option to keep company profits in the LLC as a business growth strategy, in which the tax rate will be 15 percent as opposed to a higher rate based on personal income.
The IRS does not view an LLC as a separate entity when it comes to taxes. This perspective allows members to be flexible in how they want to structure taxes, such as through each member's personal federal income tax return. Members may decide to be taxed as a sole proprietor, a partnership or as a corporation. LLC members typically pay taxes once as part of their income tax return.
Montana is one of five states to not have a sales tax, along with Alaska, New Hampshire, Delaware and Oregon. To learn more about these amazing savings and how to create a Montana LLC, contact a registered agency in Montana to inquire about a free consultation.