Form an LLC

On September 20th, 2013 I put in an order for the "Essential LLC Package" with The Company Corporation, which was recommended by Zach. The total amount came out to $1750.12, and it breaks down as follows:

Item	Cost
Essential LLC Package (LLC, New York)	$616.95
Publishing	$1125.00
Sales Tax	$8.17
Total Cost	$1750.12

My biggest question at the time was: what is "publishing," and why does it cost so damn much? This article by a lawyer explains this requirement — particular, unfortunately, to New York State — in depth, and an anonymous Quora answer speculates that the persistence of this rule may have something to do with local newspaper lobbyists!

Rolling with the fees, we filled out a bunch of paperwork including names, addresses, and social security numbers of the partners. Notably, we received a call from The Company Corporation informing us that if we intended to call ourselves a school — as in "School for Poetic Computation, LLC." — we would be subjected to lots of bureaucratic oversight and regulation of educational institutions. Thus, we chose the acronym "SFPC, LLC." which I can assure you stands for nothing. Several days later we were "filed." By October 4th we were emailed our EIN (Employer Identification Number), which is what we needed to open a bank account. We went with Chase, which Zach was already using for the provisional account he had set up through his studio, and which happened to be located across the street. We got a checkbook and five debit cards so that we could spend money. Finally, a few weeks later, a big package arrived in the mail from The Company Corporation. Inside was a pleather binder emblazoned with "SFPC, LLC." and a SFPC, LLC. paper embosser, for official business. Now we’d made it!

Fast-forward to February as Tax Day, in Mid-April, swiftly approaches.

SFPC is an LLC, which stands for Limited Liability Company, registered in the state of New York. An LLC is what’s known as a "pass-through entity," meaning that at the end of the fiscal year (which, for simplicity’s sake, we have aligned with the calendar year), the owners split up the money remaining in our account and, although it stays in our account, they are taxed for their share of it individually by way of a K-1 form, which is the IRS’s way of saying, "Partner’s Share of Income, Deductions, Credits, etc."

We could’ve divided the bank balance of SFPC, LLC. evenly between its partners, but we ended up choosing a slightly more complicated arrangement. All owners must take on at least a nominal share for their K-1.

Going forward, we will reimburse Zach and Taeyoon for how they were affected by the taxes, which they each estimate to be about several hundred dollars each, and we will set aside money for this as part of our budgeting going forward. I learned that a responsible organization should make sure the partners understand how taxes will work in advance of signing on to it. However, even having been around the block once now, it is still difficult to understand the complexities of the tax system.