- The original sign read: HOLLYWOODLAND.
- The Hollywood Sign was built in 1923 to advertise a housing development.
- Today the sign is protected under the auspices of the Department of Homeland Security.
Overlooking the movie capital of the world, the Hollywood heed has been a symbol of the mythical world of expose business for nearly 85 years. And yet, once you know the real history behind the most famous sign on the planet, you will find it to be one of the most unlikely icons ever built.
The Birth of Tinsel Town
The early days of movies were controlled by Thomas Edison and the Motion Pictures Patents Trust. Operating out of New York, Edison and company controlled movie production and ruthlessly stamped out any competitors. To avoid the trust, a few filmmakers headed about as far away from New York as you can possibly glean without getting your feet wet – a sleepy little town of orchards and sheep farms known as Hollywood.
A Quiet Microscopic Nowhere
Ironically, Hollywood got its name from the wife of a Kansas prohibitionist named Harvey Wilcox, who had moved to the Cahuenga Valley area to location up a small community that reflected his conservative beliefs. He bought 120 acres of land and built a ranch in the middle of a fig orchard. Wilcox’s wife, Daeida, while returning home by narrate from an East Coast trip, struck up a conversation with another woman on the bid who called her summer home Hollywood. Daeida liked the name so much, she decided to borrow it as the name of her ranch. By 1897, the area surrounding the ranch became known as Hollywood, and in 1903 the town was incorporated.
Enter the “MoviePeople”
In 1907 the first filmmakers came to Hollywood and place up shop. The sunny climate and tremendous distance from Edison and the Patent Trust made Hollywood an ideal location for shooting movies. Five years later, over a dozen film companies had moved into Hollywood, but the real insist hadn’t started yet. Films were shot all over town, with many ’studios’ setting up shop in old barns and unused cowsheds. Cecille B. DeMille worked out of a barn on Vine Street.
The New Gold Rush
By 1915, Hollywood was a boomtown. Studios were springing up all over town. Young hopefuls gathered by the hundreds for a shot at breaking into the movie industry. Established stars built glamorous mansions. The town was literally transformed overnight, from a sleepy conservative backwater to a bustling metropolis where fortunes were won and lost every day. As more and more people flocked to Hollywood, the real estate market exploded.
Here’s Your Sign
In 1923, the Hollywoodland Real Estate Group decided to promote some of their prime real estate by erecting a massive sign on the side of Mount Cahuenga. The sign simply read: Hollywoodland, but that was the only thing simple about it. Built at a cost of $21,000 dollars the enormous sign was made of 13 letters. Each letter was 30 feet wide and 50 feet tall. The letters were made of metal barn roofing and held up by a framework of pipes and telephone poles. Below the note was a large white circle, 35 feet in diameter. The message was meant to say: “Hollywoodland! Period.” The sign originally was studded with 4,000 20-watt light bulbs that blinked “Holly” then “Wood” then “Land” out into the clear California sky and was visible at a distance of 25 miles. As a promotional gimmick, the sign was meant to last about a year and a half. Obviously, the promotion is still going on. Only the product has changed.
Hard Times
The Great Depression hit Hollywood hard. Salary cuts were implemented; jobs slashed. The Hollywoodland sign stood as a symbol of hope for thousands of actors and actresses struggling to make it in movies. One such hopeful was a Broadway actress named Peg Entwistle who tried desperately to create it into movies but failed. In 1932, she climbed to the top of the 50-foot “H” and jumped off into the night, committing suicide from Tinsel Town’s most famous symbol.
The Depression also forced the real estate developers who built the sign into bankruptcy. By 1939, all maintenance on the sign had stopped. All 4,000 light bulbs were stolen. Vandals removed pieces of the sign, and the elements wore away at its supports. Holes and gaps began appearing in the trace, which was becoming an unstable, unsightly mess. Many neighborhoods in Hollywood lobbied for the sign’s removal
The rationing during World War Two meant that no resources could be spared to repair or fix the sign. Arrive the end of the war, the bankrupt real estate developer who had built the label, gave the city of Hollywood his remaining acreage high up in the Hollywood Hills – sitting on a small parcel of this land, sat the rapidly deteriorating tag.
By 1949 the sign was in extreme disrepair – the letter H had fallen face down. Something had to be done. Later that year, the Hollywood Chamber of Commerce, the new owners of the sign removed the “Land” part of the designate and repaired the remaining letters.
I’d Like to Pick a Vowel
In 1973 the sign was declares a historical monument by the cultural heritage Board of Los Angeles. It’s new, official status as a monument, meant that much-needed restoration and repairs would take place. The repairs would be expensive, so to raise money, the new Hollywood Designate trust put together a star-studded fund raiser, during which, individual letters of the sign could be “adopted” for $28,000 each. The fundraiser was hosted by Hugh Hefner at the Playboy Mansion and featured a unique mix of celebrities rallying around the sign. Gene Autry adopted one of the L’s. Alice Cooper bought an O. Paul Williams sponsored the W. With new financial backing, the Designate Trust unveiled a new Hollywood sign in 1978.
Sign Sponsors:
H — Terrence Donnelly, Publisher of the Hollywood Independent Newspaper
O — Giovanni Mazza, Italian movie producer
L — Les Kelley, Creator of the Kelley Blue Book
L — Gene Autrey, singing cowboy, Owner of KTLA
Y — Hugh Hefner, Creator of Playboy magazine
W — Paul Williams, Singer/composer * (some sources attribute this to Andy Williams)
O — Warner Brother’s Records
O — Alice Cooper, rock legend (in tribute to Groucho Marx)
D — Dennis Lidtke
The Sign Today
In 1992, Dan Lungren, California Attorney General specified a belief to absorb the sign. Under the plan, The Hollywood Sign Trust was to preserve and promote the sign as a symbol of the entertainment industry. The Hollywood Chamber of Commerce was entrusted with protecting the image of the sign, ensuring that any images of the sign are properly licensed. The City of Los Angeles was required to have and protect the restricted area of Griffith Park that’s home to the sign. They also provide park rangers and security for the sign.
The entire area around the sign is restricted and monitored by a state-of-the-art security system. External alarms, motion sensors and digital surveillance cameras constantly monitor the entire sign area.
In 2006, the Hollywood Sign Trust integrated the sign’s security system with the Department of Homeland Security to ensure that the sign is protected as a national care for.
You can see the view from the sign’s webcams and security cameras HERE.
Only in America – Fate of the Original Sign
When the original brand was torn down the pieces were purchased from the Hollywood Chamber of Commerce by Hank Berger, a nightclub promoter for $10,000. Berger crop up small sections of the sign and sold them as framed collectables. Sales were slow and Berger eventually gave up on the project. The crumbling, original sign then sat in storage for 25 years.
Dan Bliss, who knew Berger through business dealings, purchased the imprint for an undisclosed six-figure amount in 2003. Bliss auctioned off larger pieces of the trace on eBay, including a 5′x3′ section of the H to the Hollywood History Museum for $11,766. The rest of the sign sat stacked in a storage building. In 2005, Bliss auctioned off the rest of the sign on eBay. He opened the bidding at $300,000. Bliss wanted to use the money to fund a documentary to see if Elvis was still alive. On December 6, 2005 the remaining sections of the original Hollywood stamp sold for $450,400. Ah, only in America.
You can peruse the original ebay listing for the sign HERE.
From a real estate ad to federally-protected icon of the American entertainment industry, the Hollywood sign has endured as a lasting tribute to the dreamer in everyone.
Sources: City of Hollywood Chamber of Commerce, CBC.ca
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Filed under Stock Bankruptcy by on Sep 2nd, 2010. Comment. 
- Aloha Airlines first called Trans-Pacific Airlines (TPA).
- TPA (Aloha Airlines) first revenue flight in 1946.
- Aloha Airlines files for bankruptcy in 2005 & 2008.
July 26, 1946, is a day that will remain dear to many Hawaii residents because that’s the day Aloha Airlines, then called Trans-Pacific Airlines, had its first revenue flight. It was a day that would stamp the birth of Hawaii’s second largest flagship airline. It would also be a day that would be celebrated for years to come by generation’s o families that shared a piece of this airlines great lineage over the next six decades. Stories of “bare bones” operations, noisy flights, hula performances by the “stewardesses” and the picturesque view from the DC-3’s that took your breath away, these are the stories our grandparents remember about their flights on Trans-Pacific Airlines (TPA). They notify at the lack of comfortable accommodations and decor within the aircrafts and just smile as they remember those carefree days long gone.
Bill Wood states in his book “50 Years Of Aloha, The Story of Aloha Airlines”, the airline was the brainchild of a distinguished man named Ruddy Tongg. Mr. Tongg owned a publishing company and was an affluent Chinese who was familiar with the frustrations of the ethnic minorities in Hawaii. Back then, in spite of being in Hawaii, the Caucasians who flooded to Hawaii enjoyed many of the benefits not extended to those not of the Caucasian race. Money wasn’t so much an issue when it came to the inequities but rather just the stigma of racial prejudice that was not a part of Hawaiian culture. So it was a time of growth and new discoveries for the Hawaiian Islands. Mr. Tongg wanted to make his mark in Hawaii history and represent the strength and independence of the minority races that were treated unjustly. So, with a dream of social equality and the drive to make it work, Ruddy Tongg and a group of associates, who remain unnamed, embark on their first steps towards creating an airline that will span over 60 years and help define the financial landscape of the Hawaiian islands.
The early years of TPA were difficult and grime. Many of the aircrafts that TPA acquired were surplus aircrafts from the military so they lacked the comfortable and aesthetically pleasing atmosphere passengers are familiar with today. The planes seating configuration consisted of seats facing inward and lining up along the fuselage, or the interior walls of the plane. Many times the passengers and cargo were flying side-by-side. The aircrafts were not pressurized so they couldn’t fly very high. It was commonplace to fly along the island chain and peek almost up close the beautiful waterfalls and lush mountaintops of Maui, Kauai and the Tremendous Island of Hawaii.
Ruddy Tongg’s dream of a “kama`aina” airline was coming true. The “stewardesses” were splendid and provided each passenger with flowers, drinks and a hula exhibit onboard. With the flights between islands lasting anywhere from 45 minutes to 2 hours long. Many employees of TPA performed various tasks when asked to “fill in”. No such thing as “not on my job description” during these early days and the employees didn’t mind helping out because that was the Hawaii culture back then.
Then TPA changed its name to TPA Aloha Airlines later to drop the TPA and become simply Aloha Airlines. Two names synonymous with the airline are Dr. Hung Wo Ching and Mr. Sheridan Ing. These two men help to orchestrate a turnaround for Aloha Airlines and encourage to foster the “spirit of aloha” within the ranks of the employees. However, despite the creative and courageous efforts of the two men, Aloha Airlines continued to see fewer ample days and more bad days financially. Eventually, Dr. Ching and Mr. Ing would become the private owners of Aloha Airlines and would do all they could to continue helping the airline. Under their tutelage, the airline would expand and see morale increase despite the looming financial issues. However, Aloha was always considered to be the more stable of the two Hawaii flagship airlines. Whenever a Hawaii resident would ask which of the two airlines do better and is more
In 2005, Aloha Airlines would, in practice, by owned by a new company, Yucaipa Cos. LLC, because they bailed Aloha out of bankruptcy by investing $100 million. “The families”, Chings and Ings, as they were fondly and reverently referred to, would still have interest in the airline and would have seats on the board of directors. Many employees were conflicted about this “buyout” because of the uncertainty of what it would hold for the company in the future.
Unfortunately the addition of Go! Airlines, subsidiary of Mesa Airlines, into the Hawaii inter-island airline industry would prove to be more than just a pesky nuisance. In 2006-2008, Aloha Airlines suffered the biggest losses financially than ever before. It was rumored that Yucaipa was writing checks to the tune of $8million per month to mask operating expenses including payroll, airport taxes and rent, from January 2007 until now. No one can say how true that rumor is.
What does the future hold for Aloha Airlines now that it has filed for Chapter 11 Reorganization Bankruptcy again? The consensus is the airline may not last much longer but it would be a black day if Aloha had to close its doors.
So much history and memories surround this carrier and its place in the evolution of the state of Hawaii. Its history is a part of the many successes that abound in the site. People remember their parents and grandparents working hard at Aloha to pay their way through school. Now many of these people are successful doctors, lawyers, business owners who have this little airline in Hawaii to thank for being a part of their personal success. Students who attended mainland colleges were able to fly home because family members worked at Aloha and many others benefited because of scholarships provided by Aloha and the various unions representing Aloha employees. Victims of Hurricane Iniki and Iwa were helped because Aloha sent over supplies to help rebuild the devastated areas. When a coworker needed encourage, the other employees of Aloha were there to help. The generosity of the employees helped to foster the sense of “ohana” at Aloha, and that will missed most of all according to some. Many have watched their coworkers families grow and flourish while at Aloha. Aloha is more than unbiased an airline. It’s a testament to the power of sheer will and determination of one man, Ruddy Tongg, and to Dr. Ching and Mr. Ing and their investments emotionally and financially into an airline that they knew would help benefit the island residents. Aloha is a symbol of the strength and kindness the “kama`aina” possess and has secured itself as one of the pillars that beget up the foundation of Hawaii’s state history and, no matter the outcome, will always recount the “Spirit of Aloha” that is Hawaii!
Bill Wood, 1996 “50 Years Of Aloha: The Story of Aloha Airlines”, Aloha Airlines, Inc.
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Filed under llc bankruptcy by on Sep 2nd, 2010. Comment.
- The housing bubble has burst. Many homes are in foreclosure and the worst may be yet to come.
- Homeowners can spend Chapter 13 bankruptcy to stop foreclosure and catch up payments.
- Chapter 13 bankruptcy can also be used to renegotiate some car loans and ellimiate other debts.
The housing bubble has burst. Many people with depraved mortgage terms are finding it more and more difficult to keep up with payments. Adjustable rate mortgages (ARMS), a huge number of which were written in the last two to three years, have raised interest rates higher than many mortgage holders can afford. The holders of other subprime mortgages and “exotic” products like interest only mortgages, have found it more and more difficult to negotiate refinancing terms. Consider these facts:
- The New York Times reports that about 1.5 million homes were in foreclosure at the end of June.
- Several million more mortgages may be in default in the coming year as the slowing economy reduces housing prices and jobs are lost.
- Nearly one in 10 mortgages is either delinquent or in foreclosure.
While many people are walking away from their dream homes and high-priced mortgages, others are certain to stay in. Some mortgage lenders, like JPMorgan Chase and Bank of America, have announced plans to reduce or place a moratorium on foreclosures and to negotiate interest rate cuts, at least in the short term. These plans will affect only a diminutive percentage of mortgages, many of which are owned by investors, not the bank or company who accepts your payments and services the loans.
For those not lucky enough to fall under one of those umbrellas, another option may stop foreclosure, even on the very day the foreclosure is scheduled, give you a minute breathing residence and get you caught up on your mortgage payments, as well as other delinquent payments. It may even allow you to eliminate credit card debt and other unpaid personal debt like medical bills.
It’s called Chapter 13 bankruptcy
Do not be set off by the name. Yes, this is a form of bankruptcy, but it does not require liquidation of your assets. Instead, Chapter 13 requires that you consolidate grand of your debt into a monthly payment that you make to Chapter 13 trustee for a period of usually five years. The trustee then distributes your payments to creditors according to a thought you file with the U.S. Bankruptcy Court and claims on that money filed by your creditors.
Here’s how it works: Once a Chapter 13 bankruptcy case is filed with the bankruptcy court, the bankruptcy laws provide that no suitable action can be taken against you or your property without court permission. This is called the “automatic end”, (“conclude” being another word for injunction). The good news for those in foreclosure? The filing of a bankruptcy case will stop even foreclosures, and even on the day the foreclosure is scheduled as long as it is filed before the actual foreclosure sale occurs.
Once the case is filed, you will be required to file a plan of repayment with the court. The plan will provide that you launch making your regular mortgage payments – usually beginning on the next scheduled payment date. Some bankruptcy courts will have you make your mortgage payment to the Chapter 13 trustee, who will in turn pay the mortgage servicer. Other courts allow you to make your payment directly to your creditor.
Here’s the good part. All those delinquent payments you’ve missed can be paid back over the course of five years. The repayment understanding will calculate how much needs to be paid back, along with other loans like car loans that might also be delinquent. To the extent your budget will allow, you might also be required to pay back all or a fraction of the unsecured debt (credit card balances, medical bills, personal loans, etc.) that you owe.
Here are two important bonuses. If you qualify, you may be able to use your Chapter 13 plan to renegotiate high interest rates on car loans. In addition, once your notion is accepted by the court, any unsecured debt that remains unpaid at the end of the five year repayment period may be forgiven (bankruptcy lawyers call that “discharged.”)
Chapter 13 bankruptcy is not an easy row to hoe. You will be required to stick to a strict budget. If you become delinquent in your plan payments, your case might be dismissed. If you get behind on your house payments, the lender can petition the court to allow it foreclose anyway. But, if you’re able to successfully complete your repayment plan, you’ll emerge from Chapter 13 bankruptcy with a modern mortgage, perhaps a paid off car, and much less unsecured debt.
Great! How do I get started?
Although it is possible to file a Chapter 13 bankruptcy without the help of a lawyer, no one would recommend it. Chapter 13 is complex, and there are many pitfalls for the unwary. An experienced bankruptcy attorney will know the right steps to take. Even if you don’t have the money to pay an attorney, most attorneys do not charge for an initial consultation. If you and your bankruptcy attorney decide that Chapter 13 is best solution for you, most Chapter 13 repayment plans can be set up to allow you to pay your attorney over time through the plan payments. In some cases, even the filing fee charged by the bankruptcy court can be paid in installments.
The important thing to remember is that you must act quickly. The Bankruptcy Code requires that you receive a session of credit counseling to help you in making this important decision. If you wait till the eve of foreclosure, it may be too difficult to obtain proof of that counseling and to gather enough information to make the bankruptcy filing possible.
Where do I find a qualified attorney?
An excellent source is the National Association of Consumer Bankruptcy Attorneys, www.nacba.com, which keeps an up-to-date database with information on its member attorneys. You can also contact your local bar association, which keeps a list of referral attorneys.
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Filed under Franchise Bankruptcy by on Sep 3rd, 2010. Comment.
- Six major federal credit laws affect creditors’ ability to collect on your debts.
- These credit laws can affect your ability to mitigate your debt.
- Three federal agencies govern creditors’ ability to collect on your debts.
Sorry to disappoint you, but I’m afraid there’s no legal way to prevent creditors from collecting your money; you are both legally and morally liable for your debts. But there are legal ways to mitigate your losses such as Bankruptcy protection under Chapter 7, the Wage Earner Belief filed under Bankruptcy, Chapter 13, and other methods. In the previous article,How to Get Credit I discussed how your ability to receive credit is governed by understanding the credit laws that apply to the credit application approval process. In this article, I would like to discuss some of the laws that govern your creditor’s ability to earn money on the debt owed. The last article in the series, How to Stop Creditors From Reporting Your Credit, or Not at will discuss the laws that apply to your creditor’s ability to relate your credit behavior.
Federal laws that govern your creditor’s ability to collect money on the debt include the following:
1.) The Fair Debt Collection Practices Act of 1978 amends The Consumer Credit Protection Act of 1967, under Title VIII. It states detailed provisions of what does and does not constitute harassment, when collecting on a debt. “Harassment” is not in the eye of the beholder, whether that be the debtor or the creditor. This act doesn’t void the legal agreement of indebtedness, and it does give the creditor a right to collect on the debt. Contact the Federal Trade Commission in Washington D.C., a federal government agency, which regulates this act, for more information.
2.) The Federal Communications Act of 1934 regulates the telephone airwaves. For more information, see my article on The Federal Communications Act of 1934, entitled How to Stop Collection Calls, or Not.
3.) The Bankruptcy Reform Act of 1979 provides debtors with a financial new start by discharging debtors of debt liability. Under Chapter 7, the act does not absolve, or release, the debtor completely from the debt. The creditors receive a proportional fraction of the debtor’s assets distributed by the courts. The court can also dismiss your bankruptcy claim, if the judge finds that you have enough assets and income to pay back your creditors in full. Chapter 13 enables you to pay assist existing debts under court supervision over an extended time period. Secured interest and property exemptions registered under The Homestead Act of 1862 are usually protected assets, under The Bankruptcy Reform Act of 1979. Recognize your attorney, for more information. The Bankruptcy Reform Act of 1979, as it applies to creditors, means that once a debtor gives the creditor information on how to get hold of his attorney, by supplying the creditor with his attorney’s name, his attorney’s telephone number, and the attorney’s state, then all collection and correct procedures must stop. This does not mean that the debtor can use this as a stall tactic. Never retaining the attorney by neglecting to pay the retainer fee will not cause the collection procedures to stop.1
4.) Like The Bankruptcy Reform Act of 1979, the freshly updated Bankruptcy Reform Act signed into law on April 20th, 2005, also provides debtors with a financial fresh start by discharging or releasing, debtors of debt liability. Unlike the 1979 act, The Bankruptcy Reform Act of 2005 requires mandatory credit counseling favorite by the courts, and establishes a means test. A means test measures your means, such as income, and assets, against your liabilities, which include types and amount of debts, which is considered in the repayment of your total debt. It also requires domestic support payments be given first priority, and extends the range of debts that are non-dischargeable, debts required to be paid off under the law. It also extends the length of time from 7 to 8 years required to wait until another Chapter 7 bankruptcy filing.2 This act is a very complicated new piece of legislation. Be sure to consult a qualified attorney for more information before proceeding to file bankruptcy.
5.) The Wage Earner Plan is a scheme of dealing with creditors by filing Chapter 13 bankruptcy. Your creditors appear in court and work out a court sponsored plan of repayment. You must be a wage earner to qualify. Many times creditors fail to appear and the courts wipe out the debt. It is reported as “wiped out,” on the debtor’s credit report under WEP, The Wage Earner Plan. As in other bankruptcy cases, property such as your home registered under the Homestead Act of 1862 is usually protected. To be protected, you must register your home before you begin any type of bankruptcy or WEP proceedings.
6.) Title III of The Consumer Protection Act places limits on garnishments. Garnishments are legal attachments by the courts that take money directly out of your paycheck in order to pay your creditors. These garnishment limits are designed to leave the debtor enough money to live on. However, these restrictions do not apply to bankruptcy court orders, debts due to Federal and Position taxes, child support, or alimony payments. This law prohibits an employer from discharging, or firing, an employee subjected to garnishment for any one indebtedness. This refers to a single debt regardless of the number of levies, or number of times the same creditor garnishes your paycheck for that one debt. The employer may be prosecuted criminally, imprisoned, and/or fined for the offense of discharging an employee subjected to garnishment for any one indebtedness. 1
The enforcement of federal credit laws falls under The Federal Trade Commission, the FTC, which governs finance charge disputes, Truth-In-Lending disputes, and misleading sales statement disputes. The enforcement of federal credit laws also falls under The Federal Communications Commission, which governs collection calls, and the U.S. Department of Labor, Wage and Hour Division, which oversees garnishments.
More information on federal laws can be obtained by contacting The Federal Information Center at 1-800-688-9889. More information on state laws can be obtained by contacting your local state government information center.1
For the introduction, to this series, see article entitled, How to Understand Credit Laws.
ENDNOTES:
1 Credit Operations Manual, Jewelers Financial Services, Inc. Zale Corporation.
2 “Bankruptcy Reform Act-Brief Summary of Notable Changes,” © 2005 by Compact Library Publishers, website www.ws5.com/bankruptcy.
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Filed under Corporation Chapter 7 Bankruptcy by on Sep 5th, 2010. Comment.
- The members of an LLC are not personally liable for the obligations of the LLC.
- LLCs are constituted according to state law and not federal law.
- Members who are individuals include earnings from the LLC on their individual tax returns.
What is an LLC?
A Limited Liability Company (LLC) is a business structure that combines aspects of a corporation and a partnership. The owners are called members and not partners or shareholders. The number of members is normally not subject to any limit, and the members can be individuals, corporations, or other dinky liability companies.
Advantages
One of the main advantages of an LLC is that it is treated as a separate good entity, similar to a corporation, and the members are not personally liable for the company’s debts or obligations. There are two exceptions to this limited liability: when a member grants a personal guaranty for an obligation of the LLC, and when a court determines that the company is actually an alter ego of the owners themselves, in which case the members could be held personally liable.
In general, there are no restrictions on the persons or entities that can be members of an LLC. It may be necessary to score written consent from the members prior to admitting new owners, unless the articles of organization (see below) provide otherwise.
The majority of states and the Internal Revenue Service (IRS) recognize an LLC with a single member as a legitimate business structure.
LLCs generally require fewer formalities than a regular corporation or an S corporation. For example, the shareholders’ and directors’ meetings that are required for corporations are normally not required for LLCs.
There is flexibility in how LLCs are managed and how earnings are distributed. All the income and losses of an LLC pass through the company to the individual members. This avoids the double taxation of having to pay income tax on the company’s earnings and then again having to pay individual income tax on the company’s distributions. The LLC may have to file a tax return, but the individual owners include the company’s earnings in their individual tax returns and pay tax on them.
Disadvantages
A corporation can have an indefinite life, but LLCs normally have a fixed duration. Generally, the articles of organization must establish the date on which an LLC will end. In the absence of a provision to the contrary in the articles of organization or in the operating agreement, an LLC will also be dissolved when one of the members dies, retires, resigns, is expelled, or declares bankruptcy, unless within 90 days a majority of the other members vote to continue the LLC.
Forming and operating an LLC require greater formalities than a sole proprietorship or a partnership.
Forming an LLC
An LLC is formed according to state law and not according to federal law. All 50 states in the U.S. now allow the formation of LLCs.
There are two main actions that need to be taken to form an LLC: articles of organization and an operating agreement.
Articles of Organization:
The articles of organization have to be drafted and presented to the corresponding Secretary of State, paying the required charges. These articles will have to be in the form required by the Secretary of State. Among the information normally required is the date on which the LLC will be dissolved and a statement regarding the administration of the LLC, for example whether the LLC will be managed by one administrator, more than one, or whether the members themselves will be in charge of the administration.
Operating Agreement:
Although in many states it is not an obligation, it is advisable to have an operating agreement for the LLC. This agreement can be made before or after the presentation of the articles of organization. This agreement can establish the plot in which earnings will be distributed and can define the owners, how the ownership can change, and the responsibilities of the members.
You should contact the office of the Secretary of State in the state where you are planning to set up an LLC to find out the specific requirements for formation.
Registered Agent
Almost all the states require that a registered agent be named for the LLC. In the majority of cases, this agent can be any person who has a domicile in the state in which the LLC is constituted.
The registered agent acts as the LLC’s representative for purposes of accepting the serving of process, or notification of legal action; that is, for acknowledging any legal proceeding, or receiving notification of any legal or official communication from the government that is presented to the company.
Federal Income Tax
LLCs are established according to the laws of each state, and the federal government has no classification for LLCs. Therefore, for purposes of the U.S. federal income tax, an LLC must file a return as a corporation, a partnership or a sole proprietorship.
LLCs with a Single Member
In general, when an LLC has only one member, the fact that it is an LLC is ignored for purposes of filing a federal income tax return, but that does not change the fact that legally it continues to be an LLC.
When the only member is an individual person, the LLC’s income and expenses are reported on that person’s individual income tax return on Form 1040, Schedule C (Profit or Loss from Business), Schedule E (Supplemental Income and Loss), or Schedule F (Profit or Loss from Farming), as applicable.
When the only member is a corporation, the income and expenses of the LLC are included in the corporation’s income tax return on Invent 1120 (for a normal corporation) or Form 1120S (for an S corporation). In the case of a normal corporation (1120), the income and expenses are not transferred to the shareholders. For an S corporation (1120S), each owner or shareholder declares his or her portion of the earnings, credits and deductions declared on Schedule K-1 (Design 1120S).
LLCs with More than One Member
LLCs with more than one member must file a tax return as a partnership, using Beget 1065. Then, the members include their portions of the earnings, credits, and deductions from the LLC, as reported on Schedule K-1 (Originate 1065), on their individual income tax returns.
Form 8832
In order to choose the way an LLC will be treated for tax purposes, you can file Form 8832, Entity Classification Election. If this form is not filed, the LLC will be treated as indicated above. If you do not want to change this treatment, there is no need to file Develop 8832.
An LLC with only one member can elect to be treated as an association subject to tax as a corporation, instead of a sole proprietorship, and an LLC with two or more members can elect to be treated as an association subject to tax as a corporation or a partnership.
Form 8832 is also used when you want to subsequently change the way the LLC is considered for federal income tax purposes.
Self-Employment Tax
When a business formed as an LLC has net earnings of over $400, it may be well-known to file Schedule SE, Self-Employment Tax, which is the equivalent of the social security and Medicare taxes.
Generally, when an LLC has only one member, who reports the LLC’s earnings on Schedule C or F of his or her individual income tax return (Form 1040), Schedule SE will also have to be filed and the self-employment tax paid.
When an LLC files a tax return as a partnership (Form 1065), the members pay the tax on self-employment income (Schedule SE) on their portion of the partnership (LLC) earnings. But if there are members who are the equivalent of runt partners, they would pay this tax only if the LLC pays them for their services.
When the LLC Has Employees
When the LLC has hired employees, it needs to withhold, report, and deposit the corresponding payroll taxes: the social security and Medicare taxes, federal income tax, and the state or local income taxes that may apply, and pay the employer’s portion of the social security and Medicare taxes.
Form 941, Employer’s Quarterly Federal Tax Return, needs to be filed (Build 943 in the case of a farming business). After the close of the year, W-2 forms have to be prepared and sent to the employees and to the IRS, reporting the compensation paid for the year and the taxes withheld. Also, Form 940 or 940-EZ, Employer’s Annual Federal Unemployment (FUTA)Tax Return, must be filed when the LLC paid salaries of $1,500 or more in any quarter during the calendar year, or had one or more employees working at least part of a day in 20 different weeks during the year.
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Filed under llc bankruptcy by on Sep 7th, 2010. Comment.