I've started the process of creating an LLC through Legalzoom. I've acquired a client now though, before hearing back from the Secretary of State, etc. (I'm in Ohio).
Can I start work/invoicing with the company name before the LLC is official?
Once the LLC is official, is it a problem to have invoice dates that predate the date of incorporation?
Perhaps, is this purely a State/legal question?
No, you cannot start working and billing under the name of a legal entity that does not (yet) exist.
You can certainly start work on the project, but as of now, you are still working as a sole proprietor. You would not be covered under any of the legal protections provided by the LLC. And you cannot retroactively claim the work was done "under the corporation" after the fact when the legal corporation is finally formed. That would be like taking out insurance after the event already happened.
I am no accountant or lawyer. But since this is a site for freelancing Ill give my practical advice.
If you do your books on a cash basis then it matters when the check clears in your bank account not an invoice date.
And it really only matters to the IRS if you are collecting $600+
Again not an expert but that's my interpretation. And if you have a paying customer, accept their pmt. The rest will fall in place soon.
I am not sure about your state, but this would work in some states.
You could start the project as a sole proprietor, and then once the LLC is formed, you transfer your project to the LLC, which then continues the project. If possible, you then bill the customer after the LLC is formed.
Any payment received before then would need to go on your personal taxes, since the LLC didn't exist yet. You either need to pay taxes on it under your personal taxes, or you can negate out the transaction by hiring your LLC.
For example, let's say you accepted a deposit of $1000. That $1000 is your income on your personal tax return as business income. But, the IRS allows you to deduct expenses. So you personally hire your LLC to complete the project and you pay the LLC $1000. Your personal profit is now $0, and you pay no personal tax on it. But now, your LLC has $1000 of income that it has to pay taxes on. You basically shift the tax burden to the LLC. This is acceptable since the government still gets its taxes.
If you are going to do this, talk to your accountant to make sure that you do this the proper way.
But take note that before the LLC is formed, any agreements listing the LLC as a party could be deemed be invalid. You could word the contract or agreements so that you are allowed to transfer the project to the LLC. You probably could get away with the contract even saying the project will be completed by your LLC. What you can't do is sign the contract as your LLC. You would have to sign the contract personally. This means no limited liability while the project is in your possession, so be careful.
To protect yourself, you may want to consult an attorney concerning the proper wording of a contract.
So it's possible to start work before the LLC is formed, but there is more paperwork involved.
