Now that you've formed a single member limited liability company, there are a few financial housekeeping steps to take. Doing these will ensure that you keep your personal and business finances separate and guard against a creditor piercing your company's corporate veil.
1. If you do not have one already, apply for an Employer Identification Number (EIN).
Most limited liability company formation services offer to obtain your EIN for your LLC for a fee. The EIN is also known as a "Federal Employer Identification Number", "FEIN", or a Tax ID number.
You can think of your EIN as a social security number for your limited liability company. Like a social security number, each EIN is unique, and nine-digits long.
2. Open a business checking account in your LLC's name, with you as signatory.
You'll usually need two pieces of documentation to open your business checking account. The first is your LLC's EIN (see step 1, above). The second piece of documentation you will need is a copy of your Certificate of Organization or Articles of Organization from your state.
3. Contact your clients and customers and have them issue all future checks to your LLC.
Have your EIN handy, as many customers and clients will need it for their tax reporting when they begin paying you through your LLC.
4. Deposit those checks into your LLC bank account.
5. Withdraw profits from your limited liability company by writing a check from the LLC bank account to yourself, noting on the check that it is a distribution of profits.
In addition to the above steps, you also want to pay all your business-related expenses from your LLC checking account.
That means everything from web hosting to postage, to parking, to rent for an office space. The IRS publishes a guide, called Publication 535, which explains all the type of expenses which qualify as business deductions.
Assuming that your LLC makes money after all expenses, you can distribute those profits to yourself at any time.
The process for distributing profits from your LLC to yourself personally is simple -- write a check from the LLC's bank account to yourself personally.
Remember than a single member limited liability company is a pass-through tax entity. Any profits or losses from the LLC flow through directly to your personal income tax forms through the Schedule C on your Form 1040.
Following the above steps will get you started on properly setting up the mechanics of finances for your LLC.
If you have been self-employed in the past, you know all about quarterly estimated taxes. If this is your first time working for yourself, take a quick look at "Form 1040 ES" from the IRS website.
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