Newbie: General Questions

mjay

1. I currently work under a D.B.A and considering changing to a LLC: What Pros and Cons should I be considering?
2. In New York is it necessary to charge sales tax on my labor charges?
3. I usually charge Materials+Labor, how common is it to add a % to the materials cost?

This is a great site, thanks to all that keep it running, and all that contribute.

KENNEDY

Different states have different tax breaks for a sole prop, LLc, or corps. Talk to an accountant to see if incorperating might even help. The tax guy I spoke with here in Missouri said an LLc isn't going to protect you like you may think. If you are the one swingin' the brush you can still be sued personally. Also a little markup on materials is very common.

mjay

Thanks: I was hoping the LLC would protect my assets, vehicles, house. I mostly work with a partner, but occasionaly hire helpers. This year I'm looking at Insurance Policy's to cover my arse in case of damages or injuries.
I've been fortunate so far, but don't wish to gamble any further.

Thanks again for he reply, I'll be delving thro' the archives for info.
Blue Skies

Peladu

I just went through this for another company I started. If youre the sole owner of a company an LLC, isn't worth it. LLC's are good for people who own shares in your company with you. The attorney told me that if someones going to come after you, it's just as easy with an Inc. as it is with an LLC. LLC's cost a little more to get going, and a ton more paperwork, to get going. There is so much more why I decided against the LLC, but I am having a brain fart right now....good luck, I m going through the process right now again. I havent started a new company for five years, but it's all coming back....it's not that hard to do yourself..I saved around $1,000 doing it myself.

GriffDecker

Make sure you have both business insurance (a boatload of it) and a personal umbrella ($2 million or so). I'm an LLC, am the sole owner, and have only one employee, but my attorney said the LLC will save my personal assets. Hopefully he's right. Well, hopefully I never find out...

leiffearn

During the time of the Boston Tea Party, investors would dump all kinds of money into companies that would fill ships to the max with goods, send the products over seas and sell them for double or triple the price that they could get at home. These shipping companies (knowing that sometimes these ships would set sail and never reach their destination due to weather/pirates) wanted a little more security. Thus the corporation is born. Ivestors can take the business, but could not touch a man and his family.
Well this is the present and there are some pretty tricky lawyers out there. So, someone walks onto your jobsite takes a fall on some rebar sticking up out of the ground. First thing you think of is "boy I'm glad i'm protected". Then the courts are asking for your minutes and other paperwork required of corporations, that you have put aside for the last three months, and lawyers nail you for not running the business the way a corporation should legally be run. They nail you for poor business practices thus you lose status of corporation to sole proprietor, piercing you "corporate veil" and putting you and your family in a very scary position.
Only thing good about them are some of the tax advantages. Look how long this is I'm a loser.
I agree with a personal umbrella. Do careful work and don't hire any idiots.

Mike Finley

Okay, don't want to piss anybody off, but really bad information in the replies here.

Worst - Sole Proprietorship

Best - LLC, LLP, Corp, S-Corp

No sliding scale see? Sole Proprietor means you and all your assets are the business. Everything else means the business is the business. Your boat your house your kids college funds are yours personally.

Does this mean you are protected no matter what with anything other than a sole proprietorship? No, it means the protection is there if you do things right.

Piercing the corporate veil is what lawyers call it when somebody's business is incorporated and they try to go after your personal assets. Not allowing this is very simple to do. Don't use a personal account for biz, have a biz checking account. If you are an inc you have a meeting with yourself once a year. "Are you here? Yep, are you here? Yep. Okay, looks like everybody is here. Any new business? Nope, okay meeting adjourned." Fax the document to your lawyer have him put it in the minutes. $50.00. That is about as hard as it can get. S-corp is simply an IRS declaration you do with 1 document faxed to the IRS to designate your C-corp an S-corp and eliminate double taxation. But remember, do something fraudulent and no company entity will protect you.

It sounds complicated, but it isn't. All you need to remember is one thing only - never be a sole proprietor.

Cole

Yeah, I was thinking the same thing.

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KENNEDY

What about as a sole prop. having all business assets and accounts in the business name and keeping personal as strictly personal? You're saying even by keeping everything strictly seperate and having liability policies in place I am putting myself at risk? My understanding is that if I'm doing the work, myself AND the business could be sued. Right now its just me and a couple of guys so I'm in the field almost full time. I could see where a larger company would benifit from the LLC or Corp, but with the owner working in the field, as long as you have all the needed insurance (liability and comp) and keep all records seperate, you should be plenty protected. I could be wrong, but this is what I was told by my accountant (probabally time to find a new one!). Thanks for the info.

i_plant_art

i dont think asking the "tax guy" about what will hold up in court will do you any good. Try talking to an attourney. Sure anyone can sue anyone. Even if you were set up as a S/C corp or inc. they can still sue you personally, (yes they can) but getting something from you personally is a different story. As mentioned beore anyone can sue anyone now a days for anything,

logical

Did your accountant go to law school?

KENNEDY

He was an auditor for the IRS.

KENNEDY

Definatly point well taken about talking to a lawyer.