How to Incorporate in Louisiana vs. How to Start a Louisiana LLC

LLCs and corporations both provide liability protection for their owners. This means that each business entity acts as a shield between the human element and the physical business, so that if a lawsuit was to be filed, or a bankruptcy was to occur, the owners of the business are not likely to see their personal assets (cars, homes, savings, investments, etc..) to be used to pay debts. But beyond that, most people don’t entirely understand the differences between LLCs and corporations. Active Filings is about to drop some knowledge. Let’s take a quick look at some of the structural differences between corporations and LLCs. People looking to start a business often ask whether they should set up an LLC or incorporate for their new venture. Like everything else in life, the answer depends. Below you’ll find the three factors we think will help you make an informed decision.

• Ease of maintenance
  LLCs have the appeal of providing entrepreneurs lower overall annual maintenance and paperwork, creating a big selling point for the LLC structure. Corporations require annual meetings, directors meetings, recorded meeting minutes, and a notable amount of paperwork, while LLCs have little to no maintenance of this type. LLCs not only require less resolutions, but can make executive decisions without the need to hold an official meeting.
• Desired tax structure
  Unlike a corporation, which must pay its own taxes, LLCs are known as pass-through entities, meaning their tax structure is designed to have its profits, losses, credits, and expenses pass directly through to the owners, who report them on their personal income tax returns (similar to if the owners had a partnership or sole proprietorship). Corporations have a default tax structure known as the C corporation. This structure imposes a double-taxation, where the net income is initially taxed, and then taxed a second time as personal income after the profits and losses are distributed to the shareholders. At first glance, double taxation may seem like a downside, but for the right business it can provide advantages, such as reinvesting profits into the business.
• Investors
  Investors and shareholders often prefer doing business with corporations. The structure of a corporation is reputable and familiar. Investors know exactly where their time and money will be going with a corporation. LLCs can still be divided into percentages for members, but there is more trust behind the prominence of investing in stock within a corporation. Consider a corporation if you are serious about attracting investors.

Note that whether you form an LLC or a corporation, you’ll need to file a Beneficial Ownership Information (BOI) Report with the Financial Crimes Enforcement Network (FinCEN) once your company is officially formed with the state of Louisiana. This report provides the federal government with identifying information about your company and those with the most control over profits and business operations. However, unlike state filings, the information shared in your report does not go on the public record and there is no filing fee. (Though if you don’t want to file this on your own, we offer BOI filing service for just $25.)

A final thought. Attention should be paid to the idea of prestige, and how the name and makeup of corporations affords them a certain aura of importance. While the small business owner with an LLC is the backbone of America, corporations are what you see on TV and read about in papers. Walmart, Nike, Amazon all share the corporate structure. People at work talk about owning shares of Tesla. If prestige is what you want, the “LLC,” while an excellent choice for small to medium sized businesses, can’t hold a candle to the “Inc.”

We’ve already broken down the differences between an LLC and a corporation, we’re going to dig a bit deeper into the pros and cons of forming a business in Louisiana.

• Exorbitant Sales Tax
  In 2019, Lake Providence, Louisiana had the distinction of most expensive sales tax city in the country with a 12% combined state and city rate. The state’s largest and most notorious (and fun) city, New Orleans, sees almost 10% combined sales tax. High sales taxes hurt consumers and business alike, as businesses have to pass the costs of purchasing goods to the consumer. Overall the state has an average sales tax of 9.98%. Compare that with a state like Alaska that levies an average tax of 1.7%.
• New Tax Law
  SB 223, signed in 2019, creates an option for pass-through entities to elect to pay the state income tax at the entity level, circumventing the $10,000 federal limit for individual itemized deductions adopted by the Tax Cuts and Jobs Act (TCJA) of 2017. The TCJA capped the deduction at $10,000 for individuals, but did not place the same limit on businesses. By shifting the state income tax burden of pass-through entities to the entity level and away from the owners, the bill seeks to prevent pass-through owners from being hindered by the new deduction cap.
• Franchise Tax on Corporations
  Louisiana not only taxes corporate income, it also applies a franchise tax. The franchise tax washes out like this: corporations are taxed at $1.50 for each $1000 of assets in the State of Louisiana, and then the tax graduates to $3 per $1000 after $300,000 of equipment. LLCs are exempt from this
• Low Cost Annual Report
  Both LLCs and corporations pay the same price, $35 (online) or $30 by mail. Lots of states charge more, much more, and it can be seen as a cash grab, but with Louisiana the Annual Report fee really feels like a filing fee, and won’t break the bank for even the lowest cost business.

Looking to officially start your Louisiana corporation? Here’s how you’ll do it. First file your Articles of Incorporation with Louisiana’s Commercial Division. You can file the document online or by mail. The Articles of Incorporation cost $75 to file.

You’ll notice, when filing out the form(s), that Louisiana asks for a lot of information. They want names and addresses, which means these important tidbits of info become public record. Hire Active Filings and use our information instead. Just because you’re starting a business doesn’t mean you don’t deserve some privacy.

Looking to officially start your Louisiana LLC? Here’s how you’ll do it. First file your Articles of Organization with Louisiana’s Commercial Division. You can file the document online or by mail. The Articles cost $100 to file.

You’ll notice, when filing out the form(s), that Louisiana asks for a lot of information. They want names and addresses, which means these important tidbits of info become public record. Hire Active Filings and use our information instead. Just because you’re starting a business doesn’t mean you don’t deserve some privacy.

To keep your business in good standing with the state of Louisiana, you’ll have to jump through a few hoops. One of these hoops is filing your Annual Report.

How do I file my Annual Report?
You can file your Louisiana Annual Report online or by mail. Either way, you’ll need to visit Louisiana’s Secretary of State website. When filling out the annual report, you’ll include the following information and update it if necessary:
Name and address of the company.
Name and address of your registered agent in Louisiana.
Names and addresses of members/managers or directors/officers.

To file online:
On the state website, go to the Louisiana geauxBIZ page. Log into your account or create a new one.
Once you are successfully logged in, you’ll click “Getting Started.” Then, select “File an amendment, such as an annual report, with the Louisiana Secretary of State,” and then click “Next.”
You will need to enter your charter number. Don’t know what your number is? You can easily find it by searching the Louisiana Business Database.
On your business’ details page, click “File Annual Report.” Follow the instructions to complete the report.

To file by mail:
Go to the Louisiana Business Database page.
Enter in your business name in the search box and click “Search.”
Find your business and click the “details” button next to your business name.
Click on “Print Annual Report Form for Filing” at the top of your screen.

Mailing your report to:

Commercial Division
P.O. Box 94125
Baton Rouge, LA 70804-9125

How much does it cost?
All businesses in Louisiana pay $35 when filing online, or $30 by mail. Non-profits pay $15 online, and $10 by mail.

When is it due?
Louisiana reports are filed every year. All reports are due by the anniversary date of when the business was originally formed. For example, if you formed your business on September 20th, your due date would be September 20th of the following year. Hire Active Filings and never worry about missing your due date.

Taxes are like Lima beans. Not everyone digs them. Taxes are, however, an integral part of successfully doing business in America. While we’re not tax professionals, we definitely will do our best to try and explain what kind of taxes your business will be expected to pay.

How will my corporation be taxed?
Corporations face “double taxation.” First they pay taxes on net profits from the business, and then get hit a second time when taxed on the dividends they receive from those earnings. Dividends are taxed at the shareholder’s personal tax rate. An LLC doesn’t have this problem, which means anyone looking to form a corporation should take note of a state’s corporate income tax and personal income tax. One way of avoiding double taxation may be to elect for your corporation to be taxed as an S Corp. By filing IRS Form 2553 (Election by a Small Business Corporation), a corporation with 100 or fewer shareholders can elect to be taxed as an S Corp. Of course, if a corporation chooses S Corp status, they’ll have to jump through a few extra hoops and meet certain requirements required by the IRS.

How will my LLC be taxed?
Single member LLCs, meaning it’s just you running your business, are treated like sole proprietorships by the IRS. This means that any profits or losses your LLC experiences, will pass-through to you as the single owner. All you have to do is file a Schedule C, which reports profits or loss from your business, with your personal tax return (IRS Form 1040). It should be noted that an LLC can elect to be taxed as a corporation under Subchapter C, by filing IRS Form 8832 (Entity Classification Election), or as a corporation under Subchapter S by filing IRS Form 2553 (Election by a Small Business Corporation).

What if my LLC has more than one member?
As with a single member LLC, the IRS will view your multi-member LLC as a partnership. The LLC will retain it’s pass-through tax status, with a few wrinkles with regards to paperwork. Instead of one member filing a 1040, instead each member will have to file a Return of Partnership Income form (IRS Form 1065). This document lets the IRS check and make sure each owner is reporting their income properly. Beyond that, each LLC owner will attach a Schedule K-1 (Partner’s Share of Income, Deductions, Credits, etc.) to their Form 1040. This form shows the IRS each member’s share of the LLC’s profits and losses.

Here’s a tip: If your LLC is going to have more than one member, it would be a good idea to draw up a simple operating agreement. Most states don’t require an LLC to have one, but with so many cooks in the kitchen, you’ll want clear documentation with regards to ownership percentage, voting rights, distribution of profits and losses, as well as rules for buying out a member. You won’t be require to file the agreement, but it should be signed by each member and kept with the LLC’s important documents.

Beyond the basic information you’ll also need:
• payroll documents
• bank and credit card statements
• accounting documents
• partnership agreements
• depreciation schedules
• gross receipts
• checking and savings account interest

What tax forms do I need to file?
Corporations: Form CIFT620
Partnerships: Form 65, plus Schedule K-1
LLCs: Form IT540

What is the corporate income tax in Louisiana?
$0+                4%
$25,000        5%
$50,000+      6%
$100,000+    7%
$200,000+    8%

Louisiana also levies a Franchise Tax on corporations. $1.50 per $1,000 of assets in the State of Louisiana, up to $300,000, at which point the tax doubles to $3 per $1,000.

What is the personal income tax in Louisiana?
0-12,500              2%
12,500-50,000    4%
50,000 +              6%

When are my taxes due?
Your business returns are due as usual, April 15th for all calendar year filers. Personal returns are another matter. You get one month extra to file your personal returns, which should be a benefit to LLCs who don’t have to worry about the corporate tax schedule. Tax returns are due by the 15th day of the 5th month following the end of the tax year. For calendar year taxpayers, this date is May 15^th.

Can I get an extension for my taxes?
If you cannot file on time, you can get a Louisiana tax extension. A Louisiana personal extension will give you 6 more months to file, moving the due date to November 15th (for calendar year filers). Your extension request must be submitted by the original deadline of your return (May 15th). It should be noted that Louisiana no longer provides or accepts paper extension requests. All Louisiana taxpayers are now required to apply for a tax extension electronically.