Operate as an LLC or am individual

[dbbrooks]

Any thoughts as to whether or not to go through the troubles of incorporating?
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[calhoun1]

LLC is not incorporating. I am interested in hearing other opinions as I am thinking about doing LLC.

 

[Rav777]

Are you going to be working by yourself or have employees as well? I would look into a sole proprietorship first before moving up. Easier on the taxes and less complicated to run IMO.

 

[calhoun1]

This is where I lack information and understanding. With a sole proprietorship is the business entity separate from your personal finances? And can you get insurance to cover mistakes or accidents?

I am trying to understand the difference between it and the LLC and really don't know where to begin finding the info.

 

[Rav777]

This is where I lack information and understanding. With a sole proprietorship is the business entity separate from your personal finances? And can you get insurance to cover mistakes or accidents?

I am trying to understand the difference between it and the LLC and really don't know where to begin finding the info.

This information might help but I would talk to an attorney from your state. This is what I did since they offered free consultation. A sole proprietorship was right for me since I am only a college student and I have NO employees.

Just note that you can always start as a sole proprietorship and transition to an LLC

Sole Proprietorship vs LLC-Know the Difference

In a sole proprietorship the business entity is the same as your personal finances. So if you were to get sued, your car or home are free game as far as repayment. This is why I would recommend insuring your company. Filling taxes is easy as well as you add it to Schedule C of your 1040 Tax form.

 

[ITR43]

This information might help but I would talk to an attorney from your state. This is what I did since they offered free consultation. A sole proprietorship was right for me since I am only a college student and I have NO employees.

Just note that you can always start as a sole proprietorship and transition to an LLC

Sole Proprietorship vs LLC-Know the Difference

In a sole proprietorship the business entity is the same as your personal finances. So if you were to get sued, your car or home are free game as far as repayment. This is why I would recommend insuring your company. Filling taxes is easy as well as you add it to Schedule C of your 1040 Tax form.

Single member LLCs are treated the same as a sole proprietorship tax-wise. So in that regard, LLC would be the same.

 

[Rav777]

Single member LLCs are treated the same as a sole proprietorship tax-wise. So in that regard, LLC would be the same.

Correct, unless (as stated by the IRS) you decide to treat the LLC as a corporation.

 

[bobble]

I am a California corporation, Sub Chapter S, not for detailing but my real job which is as an IT consultant(been this way since 1995) .First question is what is your goal for setting up the business? If it's tax or income sheltering then Incorporated as a full Chapter C corp is the only true way.

LLC's are commonly referred to as "Pass thru" entities in the IRS and state tax guidelines, as are Chapter S corps for that matter. People can and will come after your personal assets if need be. Also profits and losses are taxed differently in LLC and Chapter S than Chapter C corps.

You can get Errors and Omissions insurance, business interruptions etc on any entity whether LLC/Chap S/Chap C. I have errors and omissions coverage just in case and have never used it in over 20 years of being a consultant.

IMO incorpartion is way over hyped in the small business model. Now if you have a need to hide income or profits from let's say an evil ex spouse or family member that could be deemed a dependent(IE litigation against them could come after you) then yes they provide a shelter for small businesses in that scenario. Will you have employees or sub contractors, it could help you there by keeping the business issues separate(I said could really depends). Like others have said LLC's are not corporations but liability shelters from a sole proprietorship, To answer that, in California no they are not seperate from your personal finances but neither in Chapter S in California when it counts. The only time being incorparated even helped me was one time when my mother wrecked a car that I leased thru my business. The other party tried to come after me, seeing it was a corp and the addreess etc etc he tried to press for money but my business insurance told him to piss off, filed an unjustified small claims suit for the max which did not fly in court. I stll had to defend it and waste time and money but nothing else. That scenario was the same as if an employee or anyone under the charge of my businees(I believe that's how the court stated it) would have caused the issue or sued me.

If you have specific questions I might be able to help but really you should research in your state. The laws are pretty clear in California.

 

[calhoun1]

For a detailing business with no employees, it seems the LLC is the way to go for liability. That way I can have the insurance to cover any accidents that may occur and it seems (more state specific research needed) that my personal finances are going to be reasonably safe.

I am not worried about the tax side of things. I am going to be keeping my detailing as small time when I can fit it in, but I want to be able to have the liability coverage and legitimacy that comes with a name and full entity. It will also allow me to build a customer base, website, and reputation in case I am able to expand.

 

[dbbrooks]

Thanks for the feedback. I am only considering LLC. My understanding is it is treated as pass through right on you personal taxes. I will have no employees, so I'm not sure if it's worth the paperwork to do the LLC.