What's keeping you up at night? Send us your most pressing legal and taxation questions, and our experts and the Inc.com editors will hunt down the answers.

I am a college student, and I recently establised an LLC. I wanted to be able to take deductions and eventually have an entity to buy and sell property out of. The problem is that I do not know what my obligations are as far as reporting minutes, taxes, and fees that I have to pay to keep the entity in business. In short, I need help knowing what my minimum obligations are to keep in good status, even though I might not actually use the business until a few years down the road.
-- Michael

Michael: Just because a company is not active does not relieve it from certain responsibilities. These include:

• Taxes -- A limited liability company with two or more owners must file an annual federal tax return, Form 1065, even if there is no income. (A single-owner LLC should file a Schedule C as part of Form 1040 to claim any deductions for the business, such as taxes and registration fees.) There may be state income tax filing requirements as well as an annual fee (called an annual franchise tax or registration fee) to maintain your LLC status--check with your state for its requirements.
• Entity maintenance -- Depending on your state's law and the LLC's operating agreement, you may need to hold an annual meeting to protect the integrity of the business. If you don't, you risk personal liability exposure in the event of a claim against the business--unless you respect the LLC entity, a court can effectively overlook it when it comes to liability.
  
  It's advisable to discuss your situation with a knowledgeable attorney and/or accountant so you don't overlook anything.

My wife and I have started an S corporation. Currently, we hold the chairman and co-chairman positions on the board of directors. We hold the stock, and there are no other board members. We plan to hire contractors to service our clients. If we give ourselves the titles of CEO and CFO, does this mean we are now employees and we have to pay ourselves? Would it be perfectly legal to continue planning the direction of our business without the titles, and allow the contractors to service the clients?
-- Tim, Portland, OR

Tim: When you have a corporation, state law requires that you have both corporate officers and corporate directors. The exact number of each is set by state law. For example, usually you are required to have at least a president and a secretary; you also may have a corporate treasurer and vice president. Corporate officers are employees of the corporation; directors are independent contractors. The same people can serve as both officers and directors, and receive compensation for each position. Shareholders of S corporations who perform work for the corporation as officers should take reasonable compensation for this work. The failure to do so can be a red flag to the IRS that shareholders are trying to avoid payroll taxes.

-- Barbara Weltman, Inc.com Tax Expert

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