Why Form 8655 Businesses 2024

In this talk, I will go over the main reasons contractors and small businesses may want to form an LLC and the related accounting and record-keeping requirements. Traditionally, a corporation or partnership business was created to provide limited liability. This means that these businesses are considered a separate entity, almost like its own person, separate from its owners. The business entity is liable for itself, and limited liability means that the owners of the business are not personally liable for the debts of the business. This means that if loans were made to the business or if someone sues the business, only the business can be held responsible. Creditors or angry customers can't take the owner's house and retirement savings away. Sounds great, doesn't it? However, these business entities had many rules and requirements for operations that a lot of smaller businesses were not following. And if you don't follow the rules of the business entity structure, then the business entity doesn't actually exist. Creditors may be able to do what's called piercing the corporate veil. In this situation, because the business did not follow the rules, it is not considered a separate entity from its owners, and therefore, the owners can be held personally liable, which means their homes and savings could be taken away to pay their debt. So, more recently, the LLC business entity was created to provide that limited liability protection while making the business easier to form and operate than those other types of business entities that provided limited liability. So, if you are a contractor or a small business, limited liability for debts would not be a good reason to form an LLC because you will most likely not be able to get any loans that would not require you to personally back the loan. So,...