Pursuing an Invention Idea? Consider Filing for an LLC…

Ok so if you are seriously pursuing your dream of making that invention idea a real tangible product? One word of advice is to consider filing with your state either as an LLC, S-Corp or C-Corp (in rare circumstances). First, the cost to file in most states is less than $300 (sometimes much less than this), it only takes a simple filling of a form with a check. In a matter of days you can be operating as a small business. Second, one of the main reasons for filing as a limited liability entity is to limit the personal liabilities that would be tied to any financial obligations that you undertake while operating as a business. In other words, in the unforeseen case that your business does not pan out and you can no longer make payments to your creditors, your personal property cannot be used to satisfy debts. Third, the best reason to file as a business is for the tax deduction purposes. All throughout the product development process you will incur expenses (some of them pretty significant) for example; Engineering Fees, Patent Attorney Fees, Prototyping, Sales and Marketing. All of these can be used as write-offs when you go to file your annual tax returns in April. These write-offs will ultimately lower you AGI (Adjusted Gross Income) and therefore lower the required tax payment which will lead to a larger return. 

For a good detailed explanation of the various business types please check out the following article on BizFilings.com: http://www.bizfilings.com/learn/compare-company-types.aspx

Last bit of advice, just because you live and work in one state doesn’t mean you cannot file your company in another, more small business-friendly state such as Delaware. What you will need to do however is work through a registered agent in the state you wish to file in. These agents use a single address with multiple mailbox addresses to help companies legally operate in the desired state. 

Best of luck and as always, feel free to drop a comment and I can help in anyway possible.

Sean

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