The key benefit of an LLC is that you, the member, are protected from personal liability. But in order to enjoy this benefit, the member must keep personal assets and expenses completely separate from business assets and expenses. If there are commingling of funds by the member, then a creditor could potentially pierce the corporate veil to show the member is treating the LLC as an individual account, and thus go after the members assets.

Forming an LLC in Georgia requires several steps. First, you must file the Articles of Organization (AO) and pay the required fee to the Secretary of State. To register online, visit the Georgia Secretary of States website. The registered name must contain the words Limited Liability Corporation or the abbreviate LLC in order to provide notice to the public of the nature of the business entity. During the formation, another important aspect to consider is the management of the LLC. An LLC may be run by managers who are members; however, the AO can also call for the LLC to be run by a sole managing member.

The most helpful aspect of the LLC is that a member is not liable for any of the LLCs liabilities, even though a member is always liable for his own personal torts. Therefore, while the LLC itself might be liable under agency principles, there is not vicarious liability to the individual. Thus, ALL owners are shielded from personal liability on non-tortious matters.

There is also more flexible management in an LLC than a partnership, in that all owners may exercise control unless the AO states otherwise. Also, there is less tax to pay in an LLC because of pass-through taxation, as opposed to the tax treatment of a C corporation. Business profits and losses in an LLC are taxed (like an S Corp.) at the individuals income tax rate, which is more favorable.

If you have a partnership or a sole proprietorship and you want to protect your personal assets while having your business income taxed at an individual rates, an LLC could be the business formation for you. You can, but are not required to, get a separate tax identification number. This would be beneficial in ensuring that business and personal assets remain separate and further prevent a creditor from alleging commingling of funds, in an attempt to pierce the corporate veil.

Finally, since one of the primary goals of an LLC is to insulate the member against personal liability, is it crucial that when signing documents for the LLC, the member must indicate on the document that he/she is signing as a member. If the member does not sign as a member, then he/she is signing as an individual. Signing as an individual, even if done by accidental omission, will then trigger personal liability.

Several companies practiced a policy of monies paid to them for as long as 4 months went only to pay the firms fees BEFORE any monies were used to pay the consumers bills.

Some companies claimed a 100% success rate for their programs. This was contradicted by FTC and state investigations typically showing that less than 10% of consumers are successfully completing these programs.

In the most egregious of cases, when consumers combined the fees they paid to these companies with the settled amounts of the debts, they actually paid MORE than total amount of the original debts.

Lessons Learned

Be very skeptical about responding to a debt settlement organization that contacts you directly (phone, mailing, email, etc.) or advertise as cited in the report

Check with your Better Business Bureau for any complaints, but bear in mind these organizations can be operating anywhere in the country and may not have a Georgia office. It is always a good idea before dealing with any of these companies to google them and find out what peoples experiences have been.

In the alternative, we would suggest you initiate contact with or a local not for profit organization that deals in debt settlement, such as CredAbility.

For starters, who is to say the creditor suing you really has standing to sue you? They might allege they purchased the account from the original creditor, but they offered no proof of that in their complaint. If they offered no proof, maybe they have none. When you answer the collections lawsuit and show you will make them prove ownership of your account, maybe they will be unable to do so. Also, do you really owe exactly $6,521.87? That is just an allegation, and it may be double what you really owe. If you dont argue the amount now, you will not get to it later. Maybe you owed the debt at one point, but the statute of limitations has expired on the Plaintiffs time to file a Complaint.

Those are just some of the reasons why when you get served, it behooves you to answer within your 30 days allotted to respond. If you are not sure how to answer, contact an attorney. Even if you believe they would prevail in a court hearing, you might be able to settle the debt on favorable terms after you answer the lawsuit. Depending on which court you have been sued, there might not be a trial for months, so your answer can prevent an immediate garnishment of a paycheck or a bank account. If you are sued in Magistrate Court, then the hearing will happen within a month or two of your answer, but if you are served in State Court or Superior Court, there will be months of discovery prior to the hearing date. By answering and stating a reasonable basis of dispute for a hearing, you are preventing the Plaintiff from obtaining a judgment against you during the entire time of discovery.

If you have been served and do not answer, there will probably be a default judgment against you. You will have no defenses at that time, since you were validly served and declined to raise those defenses in the proper time. Do not let that happen to you.

Learn about the corporation, LLC, partnership, and sole proprietorship.

Before you can decide how you want to structure your business, you’ll need to know what your options are. Here’s a brief rundown on the most common ways to organize a business:

* sole proprietorship

* partnership

* limited partnership

* limited liability company (LLC)

* corporation (for-profit)

* nonprofit corporation (not-for-profit), and

* cooperative.

Sole Proprietorships and Partnerships

For many new businesses, the best initial ownership structure is either a sole proprietorship or — if more than one owner is involved — a partnership.

Sole Proprietorships

A sole proprietorship is a one-person business that is not registered with the state like a limited liability company (LLC) or corporation. You don’t have to do anything special or file any papers to set up a sole proprietorship — you create one just by going into business for yourself.

Legally, a sole proprietorship is inseparable from its owner — the business and the owner are one and the same. This means the owner of the business reports business income and losses on his or her personal tax return and is personally liable for any business-related obligations, such as debts or court judgments.

Partnerships

Similarly, a partnership is simply a business owned by two or more people that hasn’t filed papers to become a corporation or a limited liability company (LLC). You don’t have to file any paperwork to form a partnership — the arrangement begins as soon as you start a business with another person. As in a sole proprietorship, the partnership’s owners pay taxes on their shares of the business income on their personal tax returns and they are each personally liable for the entire amount of any business debts and claims.

Sole proprietorships and partnerships make sense in a business where personal liability isn’t a big worry — for example, a small service business in which you are unlikely to be sued and for which you won’t be borrowing much money for inventory or other costs. To learn more about starting and running a sole proprietorship or partnership, read Nolo’s articles on each topic.

Limited Partnerships

Limited partnerships are costly and complicated to set up and run, and are not recommended for the average small business owner. Limited partnerships are usually created by one person or company (the “general partner”), who will solicit investments from others (the “limited partners”).

The general partner controls the limited partnership’s day-to-day operations and is personally liable for business debts (unless the general partner is a corporation or an LLC). Limited partners have minimal control over daily business decisions or operations and, in return, they are not personally liable for business debts or claims. Consult a limited partnership expert if you’re interested in creating this type of business.

Corporations and LLCs

Forming and operating an LLC or a corporation is a bit more complicated and costly, but well worth the trouble for some small businesses. The main benefit of an LLC or a corporation is that these structures limit the owners’ personal liability for business debts and court judgments against the business.

What sets the corporation apart from all other types of businesses is that a corporation is an independent legal and tax entity, separate from the people who own, control and manage it. Because of this separate status, the owners of a corporation don’t use their personal tax returns to pay tax on corporate profits — the corporation itself pays these taxes. Owners pay personal income tax only on money they draw from the corporation in the form of salaries, bonuses, and the like.

Like corporations, LLCs provide limited personal liability for business debts and claims. But when it comes to taxes, LLCs are more like partnerships: the owners of an LLC pay taxes on their shares of the business income on their personal tax returns.

Corporations and LLCs make sense for business owners who either (1) run a risk of being sued by customers or of piling up a lot of business debts, or (2) have substantial personal assets they want to protect from business creditors. To learn more about forming an LLC or a corporation, see Nolo’s articles on each topic.

Nonprofit Corporations

A nonprofit corporation is a corporation formed to carry out a charitable, educational, religious, literary, or scientific purpose. A nonprofit can raise much-needed funds by soliciting public and private grant money and donations from individuals and companies. The federal and state governments do not generally tax nonprofit corporations on money they take in that is related to their nonprofit purpose, because of the benefits they contribute to society. To learn more about nonprofit corporations, see Nonprofit Basics.

Cooperatives

Some people dream of forming a business of true equals — an organization owned and operated democratically by its members. These grassroots business organizers often refer to their businesses as a “group,” “collective,” or “co-op” — but these are often informal rather than legal labels. For example, a consumer co-op could be formed to run a food store, a bookstore, or any other retail business. Or a workers’ co-op could be created to manufacture and sell arts and crafts. Most states do have specific laws dealing with the set-up of cooperatives, and in some states you can file paperwork with the secretary of state’s office to have your cooperative formally recognized by the state. Check with your secretary of state’s office for more information.

Republished with Permission  2009 Nolo.

Don’t miss these fourteen tax deductions for your small business.

It’s simple: The more tax deductions your business can legitimately take, the lower its taxable profit will be. Also, in addition to putting more money into your pocket at the end of the year, the tax code provisions that govern deductions can also yield a personal benefit: a nice car to drive at a small cost, or a combination business trip and vacation. It all depends on paying careful attention to IRS rules on just what is — and isn’t — deductible.

When you’re totaling up your business’s expenses at the end of the year, don’t overlook these 14 common business deductions.

1. Auto Expenses

If you use your car for business, or your business owns its own vehicle, you can deduct some of the costs of keeping it on the road. Mastering the rules of car expense deductions can be tricky, but well worth your while.

There are two methods of claiming expenses:

* Actual expense method. You keep track of and deduct all of your actual business-related expenses.

* Standard mileage rate method. You deduct a certain amount (the standard mileage rate) for each mile driven, plus all business-related tolls and parking fees. In 2010, the standard mileage rate is 50 cents per business mile driven, a decrease from the 55 cents per mile rate in effect for 2009.

As a rule, if you use a newer car primarily for business, the actual expense method provides a larger deduction at tax time. If you use the actual expense method, you can also deduct depreciation on the vehicle. To qualify for the standard mileage rate, you must use it the first year you use a car for your business activity. Moreover, you can’t use the standard mileage rate if you have claimed accelerated depreciation deductions in prior years, or have taken a Section 179 deduction for the vehicle. (For more on Section 179, see “New Equipment,” below.)

If your auto is used for both business and pleasure, only the business portion produces a tax deduction. That means you must keep track of how often you use the vehicle for business and add it all up at the end of the year. Certainly, if you own just one car or truck, no IRS auditor will let you get away with claiming that 100% of its use is related to your business.

2. Expenses of Going Into Business

Once you’re running a business, expenses such as advertising, utilities, office supplies, and repairs can be deducted as current business expenses — but not before you open your doors for business. The costs of getting a business started are capital expenses, $5,000 of which you may deduct the first year you’re in business; any remainder must be deducted in equal amounts over the next 15 years.

Tip If you expect your business to make a profit immediately, you may be able to work around this rule by delaying paying some bills until after you’re in business, or by doing a small amount of business just to officially start. However, if, like many businesses, you will suffer losses during the first few years of operation, you might be better off taking the deduction over five years, so you’ll have some profits to offset.

3. Education Expenses

You can deduct education expenses if they are related to your current business, trade, or occupation. The expense must be to maintain or improve skills required in your present employment, or be required by your employer or as a legal requirement of your job. The cost of education that qualifies you for a new job isn’t deductible.

4. Legal and Professional Fees

Fees that you pay to lawyers, tax professionals, or consultants generally can be deducted in the year incurred. However, if the work clearly relates to future years, they must be deducted over the life of the benefit you get from the lawyer or other professional.

Business books, including those that help you do without legal and tax professionals, are fully deductible as a cost of doing business.

5. Bad Debts

If someone stiffs your business, the bad debt may or may not be deductible — it depends on the kind of product your business sells.

* Goods. If your business sells goods, you can deduct the cost of goods that you sell but aren’t paid for.

* Services. If, however, your business provides services, no deduction is allowed for time you devoted to a client or customer who doesn’t pay.

6. Business Entertaining

If you pick up the tab for entertaining present or prospective customers, you may deduct 50% of the cost if it is either:

* directly related to the business and business is discussed at the event — for example, a catered meeting at your office; or

* associated with the business, and the entertainment takes place immediately before or after a business discussion.

Tip Make notes. On the receipt or bill, always make a note of the specific business purpose — for example, “Lunch with Joyce Slater of Ace Manufacturing Co. to discuss widget contract.”

7. Travel

When you travel for business, you can deduct many expenses, including the cost of plane fare, costs of operating your car, taxis, lodging, meals, shipping business materials, cleaning clothes, telephone calls, faxes, and tips.

What about combining business and pleasure? It’s okay, as long as business is the primary purpose of the trip. However, if you take your family along, you can deduct only your own expenses.

8. New Equipment

Some small businesses can write off the full cost of some assets in the year they buy them, rather than capitalizing them — deducting their cost over a number of years. (See Current vs. Capital Expenses for information on expenses that must be capitalized.)

Section 179 of the Internal Revenue Code allows you to deduct up to $250,000 of the cost of new equipment or other assets in 2009 (scheduled to go down to $133,000 in 2010). This is subject to a phase-out if you place more than $800,000 of equipment in service in 2009 ($510,000 in 2010). Some assets don’t qualify for this Section 179 deduction, including real estate, inventory bought for resale, and property bought from a close relative.

There is also a first-year bonus depreciation deduction in effect for 2009 (and 2008). This special deduction allows taxpayers to depreciate 50% of the adjusted basis of qualified property during the first year the property is placed in service. This deduction can be taken in addition to the Section 179 deduction and offers tremendous tax savings on property purchased in 2009 and 2008.

9. Interest

If you use credit to finance business purchases, the interest and carrying charges are fully tax-deductible. The same is true if you take out a personal loan and use the proceeds for your business. Be sure to keep good records demonstrating that the money was used for your business.

10. Moving Expenses

If you move because of your business or job, you may be able to deduct certain moving costs that would otherwise be non-deductible personal living expenses. To qualify, you must have moved in connection with your business (or job, if you’re an employee of your own corporation or someone else’s business). The new workplace must be at least 50 miles farther from your old home than your old workplace was. (Technically, moving expenses aren’t business expenses; there’s a special place to list them on your Form 1040 tax return.)

11. Software

As a general rule, software bought for business use must be depreciated over a 36-month period, but there are some important exceptions:

* Computer software placed in service from January 1, 2003 to December 31, 2010 is eligible for a Section 179 deduction, which means that 100% of the cost of software can be deducted in the year purchased. Starting in 2011, you will no longer be able to use Section 179 to deduct off-the-shelf software.

* When software comes with a computer, and its cost is not separately stated, it’s treated as part of the hardware and is depreciated over five years. However, under Section 179, you can write off a whole computer system (including bundled software) in the first year if the total cost is less than a certain amount ($250,000 in 2009; scheduled to go down to $133,000 in 2010). See IRS Publication 946, How to Depreciate Property.

12. Charitable Contributions

If your business is a partnership, a limited liability company, or an S corporation (a corporation that has chosen to be taxed like a partnership), your business can make a charitable contribution and pass the deduction through to you, to claim on your individual tax return. If you own a regular (C) corporation, the corporation can deduct the charitable contributions.

Tip If you’ve got some old computers or office furniture, giving it to a school or nonprofit organization can yield goodwill plus a tax benefit. However, if the equipment has been fully depreciated (written off), you can’t claim a deduction.

13. Taxes

Taxes incurred in operating your business are generally deductible. How and when they are deducted depends on the type of tax:

* Sales tax on items you buy for your business’s day-to-day operations is deductible as part of the cost of the items; it’s not deducted separately. However, tax on a big business asset, such as a car, must be added to the car’s cost basis; it isn’t deductible entirely in the year the car was bought.

* Excise and fuel taxes are separately deductible expenses.

* If your business pays employment taxes, the employer’s share is deductible as a business expense. Self-employment tax is paid by individuals, not their businesses, and so isn’t a business expense.

* Federal income tax paid on business income is never deductible. State income tax can be deducted on your federal return as an itemized deduction, not as a business expense.

* Real estate tax on property used for business is deductible, along with any special local assessments for repairs or maintenance. If the assessment is for an improvement — for example, to build a sidewalk — it isn’t immediately deductible; instead, it is deducted over a period of years.

14. Advertising and Promotion

The cost of ordinary advertising of your goods or services — business cards, yellow page ads, and so on — is deductible as a current expense. Promotional costs that create business goodwill — for example, sponsoring a peewee football team — are also deductible as long as there is a clear connection between the sponsorship and your business. For example, naming the team the “Southwest Auto Parts Blues” or listing the business name in the program is evidence of the promotion effort.

Easily Overlooked Business Expenses

Here are some additional routine deductions that many business owners miss. Keep your eye out for them.

* audiotapes and videotapes related to business skills

* bank service charges

* business association dues

* business gifts

* business-related magazines and books

* casual labor and tips

* casualty and theft losses

* coffee and beverage service

* commissions

* consultant fees

* credit bureau fees

* office supplies

* online computer services related to business

* parking and meters

* petty cash funds

* postage

* promotion and publicity

* seminars and trade shows

* taxi and bus fare

* telephone calls away from the business

Note: Just because you didn’t get a receipt doesn’t mean you can’t deduct the expense, so keep track of those small items.

What’s Below:

• Should I deal with debt collectors or try to avoid them?
• Collection agencies have been calling me all hours of the day and night. How can I get them to stop contacting me?
• The collections department of a local merchant is harassing me. Can I do anything about it?
• A bill collector insisted that I wire the money I owe through Western Union. Am I required to do so?
• Can a collection agency add interest to my debt?
• A collection agency sued me and won. What collection measures can it now take against me?

Unless you’re “judgment-proof” (that is, broke) or plan to file for bankruptcy, most credit counselors believe that you shouldn’t ignore your debt or try to hide from a debt collector. Generally, the longer you put off resolving the issue, the worse the situation and consequences will become. Whether you negotiate directly with the collector or obtain a lawyer’s assistance, most counselors feel it is almost always best to talk with the collector and try to work out a mutually satisfactory arrangement.
Collection agencies have been calling me all hours of the day and night. How can I get them to stop contacting me?

It’s against federal law for a bill collector who works for a collection agency (as opposed to working in the collections department of the creditor itself) to call you at an unreasonable time. Before 8 a.m. or after 9 p.m. are considered unreasonable times, but other hours may be unreasonable, too, such as daytime hours for a person who works nights.
The federal Fair Debt Collection Practices Act (FDCPA, 15 U.S.C.  1692 and following) bars collectors from:

• harassing you
• using abusive language
• using false or misleading statements
• adding unauthorized charges, and
• many other practices.

Under the FDCPA, you can demand that the collection agency stop contacting you (except to tell you that collection efforts have ended or that the creditor or collection agency will sue you). Make your request in writing.

The collections department of a local merchant is harassing me. Can I do anything about it?
Unfortunately, the federal Fair Debt Collection Practices Act (FDCPA) does not apply to the collection department of a creditor (it only applies to outside collection agencies). However, many states have fair debt collection laws that do cover creditors’ collection departments.

Check with your state consumer protection office to see if your state law applies to in-house collectors and to find out what types of collection practices it prohibits.

A bill collector insisted that I wire the money I owe through Western Union. Am I required to do so?

No. Many collectors, especially when a debt is more than 90 days past due, will suggest that you make an “urgency payment,” by doing things like:

• sending money by express or overnight mail, which will add at least $10 to your bill
• wiring money through Western Union’s Quick Collect or American Express’s Moneygram, another waste of money, or
• putting your payment on a credit card — you’ll never get out of debt if you do this
• Mailing your payment with a first-class stamp is fine. Or, pay by debit card or check card — but first ask if the creditor will charge a fee. If you send your payment through the mail, you may receive further phone calls from the collector until the creditor receives and processes your payment.

Can a collection agency add interest to my debt?

Yes. The Fair Debt Collection Practices Act (FDCPA) allows a collector to add interest if your original agreement calls for the addition of interest during collection proceedings or the addition of such interest is allowed under state law. Every state authorizes the collection of interest, although the maximum amount allowed varies.

A collection agency sued me and won. What collection measures can it now take against me?

Before obtaining a court judgment, a bill collector generally has only one way of getting paid: asking. This is done with calls and letters.

However, once the collector (or creditor) sues you and obtains a court judgment, the law allows it to take further steps to collect the debt. The collector can:

• garnish up to 25% of your net wages
• seize bank or other deposit accounts, and
• record a lien against real property — which will have to be paid when you sell or refinance your property.

Even if you’re not currently working or have no property, the judgment won’t disappear. Depending on the state, court judgments can last up to 20 years. In many states, it can be renewed for years beyond that.