Legal Question in Business Law in California

I was a casual online seller. This year I thought I'd try my hand at selling on a bigger platform like Amazon. I wasn't sure how things would work out so I thought I'd wait to apply for a business license, resale license. I did, however, get an EIN. I've now been selling for 2 months and I've sold approx $4,000. I'm still in the negative though. I would like to convert the sole proprietorship to an LLC. However, in order to do things the right way should I be applying for my business license/resale license under my sole proprietorship while I wait for the LLC paperwork to go through, and then reapply for my business license/resale license? Second question: when I apply for my business license, can I retroactively date the start of business to the beginning of January even though it's March without getting into trouble? Third question: I would much rather report all income under the LLC I create to keep things simple. However, is this legal?


Asked on 3/11/16, 10:21 am

1 Answer from Attorneys

You need to take a step back and ask yourself why in the world you would go to the trouble and expense of forming an LLC and paying the annual LLC minimum tax of $800 in the first place, for a business that has gross revenues of $4,000 and no profits. Are you going to bring in investors? Are you expecting to have liability exposure (not including voluntary debts or fraud) in excess of reasonable insurable limits? Do you expect to build the business to the point that someone else will want to buy it, you will want to sell it, and the transaction would be tax advantaged if you sell the buyer an LLC instead of just selling the business assets? Unless the answer to one or more of those questions is "Yes," there is zero reason to form the LLC in the first place and all the rest of your questions go away. You would just be creating work for yourself, tax complexity, and added expenses, for no benefit to you of any kind.

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Answered on 3/11/16, 11:40 am


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