Barry M 73 Report post Posted January 13, 2005 What type of entity is your business? In your opinion what are the pros and cons of the different types? Has your buiness changed entity types since first starting out? I am leaning towards sole proprietorship because it is simple and requires less formal action to set up. Until I start to generate a lot of money my overall taxes may be less than if incorperated. I'm also not considered an employee of my business so I don't have to pay unemployment tax. Also I can shift funds in or out without much limitations. The major disadvantage is I am personally liable for any debts or taxes of the business or other claims, such as legal damages resulting from a lawsuit. Share this post Link to post Share on other sites
Celeste 341 Report post Posted January 13, 2005 Barry, We are an LLC. We felt it would offer the best of both worlds as liabilities and assets are separate and that was based on some bad personal financial decisions (crappy credit) ...where ours got complicated (which was an error early on on my part) was when the IRS decided we were a partnership. We have more forms to file (wow 2), however, the reason we did not change it was because it would have taken 5 years of paperwork to make the one change so that we only would file one. We were advised to check with our attorney and accountant on which way to go......not a big help since one said sole prop and one said LLC....so I would suggest asking one or the other, whomever you are more comfortable with. If you don't want the LLC to pay the higher tax rate, at the end of the year, give yourself a big bonus. Your personal tax liability will be lower. In an LLC, you are not an employee either, you are a member. With that in mind, any personal money that you put into your company becomes a liability owed back to you as a member...you can sort of shift money, as you say, with it being advances on what you gave the company. As far as the formality, ours was incredibly simple - did not require an attorney - just visited the Secretary of State website for our state and it was all there. Fill in, attach a check and tada! Good luck in your decision :) Celeste Share this post Link to post Share on other sites
newlook 265 Report post Posted January 13, 2005 We were a Sole Properietorship but then went straight to a "S" Corporation filing. Share this post Link to post Share on other sites
Barry M 73 Report post Posted January 13, 2005 We were a Sole Properietorship but then went straight to a "S" Corporation filing. Why? Just curious. Share this post Link to post Share on other sites
Grant 500 Report post Posted January 14, 2005 We are a California Corporation and as such we also own a LLC. Share this post Link to post Share on other sites
Jon 533 Report post Posted January 14, 2005 WAS going to go LLC this year had not health stepped in the way. Share this post Link to post Share on other sites
newlook 265 Report post Posted January 14, 2005 Barry, We were advised to go this route by our CPA. The overall deciding factor was for tax purposes. As a sole proprietor we found ourselves in a higher tax bracket vs. where we wanted to be. The S Corp. status also offers a "shelter" to me personally and my family in the event (God forbid) someone decides they want to sue us. The person suing can go after my company but not me personally. Share this post Link to post Share on other sites
newlook 265 Report post Posted January 14, 2005 Also :), as our company continues to evolve and expand we feel it is a natural course that our business has taken ~ Inc. status. Share this post Link to post Share on other sites
bill3752 14 Report post Posted January 17, 2005 For most small business, the normal question is SubS / LLC vs. sole proprietorship (SP. We are a sub S, and as such any income is treatable as if we were a SP - this may contradict one of the earlier messages. My main reason for using a Sub S is provide an extra level of liability protection as mentioned earlier. Hard to differentiate benefit of Sub S over LLC, as differences are not significant for very small business. One of main concerns of some is the seeming complexity of incorporating. In most states this is not difficult to do yourself. Have done it w/o an Atty once, and about to do it again. Contact you Dept of State for info. Good luck Share this post Link to post Share on other sites
PressurePros 248 Report post Posted January 17, 2005 Without being specific there is some misinformation in the above posts. LLC's and S Corps provide the same benefit of pass through taxation. C Corps can get hit with double taxation (unless you drain the entity at the end of the fiscal year). Owners/Shareholders of S corps and LLC's will be held responsible in suit if the business entity is dissolved to escape liabilities (such as being sued for negligence). I preferred to go with an S corp because of the ability to shift shares and ownership without 100 percent shareholder approval. Depending on the state, LLC's also have a limited life span. Some states require an LLC to list a dissolution date in it's articles of organization. I think also if a partner dies in an LLC it can be forced to dissolve. Corporations can be started with one shareholder. Most states require an LLC to have two owners at least. I can't see how having a business entity can help with bad credit (Other than supplying a new credit history I suppose) But initially, credit is just as hard for a business with no history to attain as it is for a person with bad credit to obtain. I'm sure I am missing something here, and I am not the smartest guy when it comes to legal stuff. I looked thorougly into this before starting PressurePros, Inc. Yeah you can go online and file this and that and save a few bucks but if your aspirations are bigger than owning a mom and pop operation you need to consult an attorney. It will cost you about $1200 for an attorney to do all the legwork and write your shareholder agreement and file all necessary paperwork. Share this post Link to post Share on other sites
newlook 265 Report post Posted January 19, 2005 Ken, It did cost us around $1200 to do the filing and shareholder agreement. As far as the credit is concerned you are correct in your statements. It takes a little "doing" for a Inc, LLC, sole prop. and etc to establish credit. Share this post Link to post Share on other sites
tropical wave 22 Report post Posted January 19, 2005 we are INC.......... we're both the Police and lawsuits fly around like crazy these days against cops, so our accountant (who is also in a police family) said to use the INC for just that purpose....If one of us gets sued working the law enforcement job, no punative damages get taken from the business, the "corporation" is safe.....In this type of business, Police, we have to keep our names out of anything that shows $$$$$$$$$. House, business etc etc etc Too many "ambulance chasers" out there to risk losing everything..... Mike & Lisa Share this post Link to post Share on other sites
Celeste 341 Report post Posted January 20, 2005 The bad credit thing was one reason we went with the LLC. An LLC is separate to a good degree from the members.....the LLC can own things that cannot be listed as an asset for a member if the member has poop credit. Bottom line, if someone wanted to get a judgment on me and tried to execute it thinking that I owned two vehicles...guess what.....my company owns those vehicles and my personal creditor can't touch. Incorporating serves the same purpose but the taxation is different for a corp than an LLC. Re-establishing credit as an LLC is very difficult when you have had personal credit problems because it always falls back to the managing principals info. Our best solutions to that is - if you can't pay for it now do one of two things: Do without it or get your tail to work so you can. Haven't charged or borrowed in over 5 years and ain't gonna restart again. Celeste Share this post Link to post Share on other sites
Mathew Johnson 123 Report post Posted January 21, 2005 I am activly looking to start an S Corp.... I am cutting a deal with my attorney... Corporation paperwork for DecK Restoration Share this post Link to post Share on other sites
Scott Stone 604 Report post Posted January 24, 2005 I am a sub S corp. We did it on the recommendation of our accoutant, who is wonderful. The first year, it saved me $5000 in taxes, and it has done nothing but save us more every year. My personal thought is that I want people to use me as a professional in my field. I have to respect that others are professionals in their respective fields. That being the case, for the most part, I let experts be experts, and am willing to pay for that knowledge. So following this theory, get an attorney to do the corporate charter, so that it does not have a mistake in it that will cost you later. Scott Stone Share this post Link to post Share on other sites
Beth n Rod 1,279 Report post Posted January 24, 2005 We are an S Corp also. :groovy: Share this post Link to post Share on other sites
newlook 265 Report post Posted February 4, 2005 So are we...:) Share this post Link to post Share on other sites
Washaway 64 Report post Posted March 28, 2005 S corp, right from the get go. Infact we were incorporated before we applied for an occupational license. Share this post Link to post Share on other sites
JFife 14 Report post Posted March 30, 2005 I'd like some advice from some of you biz-whizzes.....say, you were going to be doing multiple, unrelated things, and wanted different biz names. For instance, JF washing, JF lawnmowing, JF Carpet Care an JF Millwork. Is there a suggested way you could do this so that the company name was Jon Fife Enterprises, and you'll file taxes under that company name, but the other businesses would have their own license, bookkeeping, etc. Obviously, you'd want the biznesses separate, so you new what was doing well and what wasn't. But at the end of the year could you lump it all together?? Anyone got ideas??? Share this post Link to post Share on other sites
tropical wave 22 Report post Posted March 31, 2005 I'd like some advice from some of you biz-whizzes.....say, you were going to be doing multiple, unrelated things, and wanted different biz names. For instance, JF washing, JF lawnmowing, JF Carpet Care an JF Millwork. Is there a suggested way you could do this so that the company name was Jon Fife Enterprises, and you'll file taxes under that company name, but the other businesses would have their own license, bookkeeping, etc. Obviously, you'd want the biznesses separate, so you new what was doing well and what wasn't. But at the end of the year could you lump it all together?? Anyone got ideas??? incorporate.....give the corporation a name, then all the other businesses under the corporation can have seperate names too, just owned by the main corporation.....pretty much like all big business is done, like FOX for example, the corporation owns, tv channels, movie studios, amusement parks, telecoms etc etc Share this post Link to post Share on other sites
Grant 500 Report post Posted March 22, 2006 Michael is mostly correct. Incorporate Jon Fife Enterprises and then create LLC's (Limited Liability Corporations) for each of the others. This creates an isolation layer that protects you and each of the LLC's and the Corporation. LLC's and Corporations are legally created identities much the same as a person. Each will require its own tax return each year. Sit down with an Accountant AND an Attorney, they will take care of all the nuts and bolts for you. Share this post Link to post Share on other sites
HotShot 34 Report post Posted April 30, 2006 WOW...I'm trying to comprehend all of this info and it's hurting my brain :) I know when I'm filling out w-9's or whatever from different clients of mine it seems so confusing if I were a corp or LLC. I understand the benefits being seperate and all, but doesn't there have to be x number of "board meetings" per year and all this bologna. I dunno, maybe I should not just listen to people that probably don't know what they are talking about (some of my moron friends) and consult an expert.... Share this post Link to post Share on other sites
R L S 14 Report post Posted May 1, 2006 I just got incorporated and went with a C-Corp. Share this post Link to post Share on other sites
Thad 135 Report post Posted May 2, 2006 doesn't there have to be x number of "board meetings" per year and all this bologna. I'm going to talk to the accountant that the guy I sub most of my work from uses. The accountant told him to have his board meetings (he and his wife are the officers) wherever they were going on vacation that year. ;) Share this post Link to post Share on other sites
HotShot 34 Report post Posted May 2, 2006 I'm going to talk to the accountant that the guy I sub most of my work from uses. The accountant told him to have his board meetings (he and his wife are the officers) wherever they were going on vacation that year. ;) yeah, let me know....that sounds pretty awesome, I think that we need to have a board meeting in Hawaii :) THE BOARD has always wanted to go there...heh heh Share this post Link to post Share on other sites
