Sole Or LLC.. Need Some Help.. Thanks..

Mike Finley

Gift Card -

Um... you wouldn't want an accountant to fill out forms to form a business entity.

If you wanted the help of a professionals for that, that would be a lawyer.

In regard to an accountant - he/she will help you understand and decide which entity to use based on what you are doing. This is in regard to taxes, payroll etc..

You must be under the impression that all business entities are treated the same by the IRS?

Giftcard

And No "I" don’t need an accountant to fill out a form that is self explanatory are they going to check a box I won’t.


I understand the whole tax and payroll thingy “IRS”. Simple as less tax SP, then LLC then INC. Most form a LLC or INC for protection of personal assets and if you don’t sign your name properly on contracts and all other documents you leave yourself still liable for the company. I need information to protect myself and if I hire an accountant he/she would need too know how I would need to sign the document and my bank account so I’m still not personally liable. What I would learn from my accountant concerning my signature would carry forward on everything I sign/my name is on with the separate entity.

Mike Finley

This isn't for you Gift Card, cause based on what you posted you've got it all figured out.

This is just for anybody else who might not know there is a difference between business entities and why an accountant should be the first person they consult in this process.

Giftcard

My point is if you went too an accountant or lawyer to professionally set up a business entity your signature is wrong which still makes you liable for that entity. Check your sig my friends. So all the money you spent for service and saved on taxes and you moved to your personal account someone can still get if they won a lawsuit against you.

asnider

i got my LLC done at LegalZoom......don't remember how much it cost, but it was pretty cheap. You can't afford to not spend the money and form an LLC.....my two cents....

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Adam Snider
Opus Magnum Software - Creators of EZJOB
Construction Software Reviews & Articles

Cache

There is a mistake in the quote. An LLC wouldn't elect to be treated as an S-corp. Both of them are pass through entities. To avoid paying some of the self-employment taxes, the LLC would elect to be treated as a C-CORP, so that in your example the business wouldn't have to pay self-employment tax on $50K worth of income. Not only that, but the $50K in retained earnings would be taxed at a low 15% rate instead of the 25-28% rate that the individual would pay.

Cache

Agreed . People here are making this too complicated. Simply log on to one's state website and fill out the form and send it in. In my state (UT) it costs less than $50 to set up an LLC. Others here have different fees. Texas = $300 and Washington = $175. You don't need an accountant or Legalzoom.com or anyone else to help you. If you can't figure out how to fill out a self-emplanitory state form, then you shouldn't be trying to run a business.

In regard to determining which setup fits best. An accountant is going to use the same rules that I posted in a previous post.

So here's my general rule....

If you plan on making less than about $50K a year, or if you plan on having enough expenses to be written off that you will actually show a loss.... then the LLC is the way to go. Losses of a c-corp can't be written off against other personal income (such as spouse's income).

OTOH, if the business is likely to make more than $75K and you're considering company life insurance, and other fringe benefits as well as allowing the company to accumulate earnings of up to $50K per year.... Form the LLC and send in a Form 8832 to request taxation as a c-corp.

asnider

ouch, i take offense to that cache. I have been successful enough even though I don't know the intracy of setting up different entities. i figure it's best to pay experts to do their job well and free myself up to do what i do well (which is not setting up legal entities).

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Adam Snider
Opus Magnum Software - Creators of EZJOB
Construction Software Reviews & Articles

Cache

I realize that it sounded a bit harsh, but it wasn't intended to. The point is that the "intricacies" you speak of don't really exist for small business owners. Setting up an LLC in most states is easier than applying for a driver's license. It took me about 20 minutes to completely register my LLC which I chose to have taxed as a c-corp, and it cost me $35. Conversely, a relative of mine used a very popular online site to do his. He paid $350 and ended up with the same structure, but to be fair he did get a company stamp.

There is a lot of talk about setting up a Nevada, Delaware, Wyoming, or Alaska Corp, and then a couple sub-entities. For the most part, these are completely bogus and many times fraudulent. The privacy that they afford you only exists until you get sued or try to open bank accounts or even file your taxes. Once you do any of those things, the privacy is gone. Furthermore, they do pretty much nothing to help you LEGALLY avoid taxes. Why? Because money earned in any state requires taxes paid in that state. Simply forming a corp in a tax free state doesn't exempt the owner from taxes on income from a different state. State tax authorities are really cracking down on that one.

I guess what I'm getting at is that it all comes down to one question. How much money do you expect to make? My simple rules explained above will tell you whether you want an LLC taxed as an LLC, or taxed as a C-corp. Other than that, the IRS has rapidly done away with most of the advatages of either.

Once you get to the point of having numerous shareholders, or you think you want to issue stock to raise capital, then by all means talk to an accountant and a lawyer. But if you are setting up an entitiy with fewer than 3 stakeholders, it really is incredibly easy. It is like hiring a lawyer to help you apply for a driver's license. Or hiring an accountant to help you licence and register you car.

Mike Finley

Why is there such a misunderstand on what is being said? What part of anything that I've written addresses an accountant setting up an LLC or any other entity?

I'll say it one final time as clearly as possible

An accountant can help you determine the entity.

A lawyer will help you create the entity.

As for setting up an entity yourself online using your secretary of the states website -- You can certainly do this, it's quick and it's easy, are there any ramifications long term? Maybe. Maybe not.

In my lifetime I've had businesses that were LLCs, sole proprietors, s-corps and LLPs. I've had lawyers register them and I've registered them myself. Is there a difference in the legal work of what you do yourself and what you get from the lawyer - YES. There is a huge difference in the articles of incorporation. The ones from lawyers are MUCH more detailed and cover many more details and intricacies.

Does it make any difference? I couldn't tell you one way or the other, but there IS a big difference between the two.

The same argument is made by your customers everyday as to why they should pay you $500 to install a door when they could do it themselves if they had the time.

I've gotten to the point where $300 or $400 to have something done correctly for sure and without a doubt is well worth it to me. Is it worth it to you? That's up to you to decide. There are many ways to skin a cat.

My advice as always will be to consult an accountant always.

People will spend more time buying a car that will depricate down to a worthless piece of junk then they will setting up their business correctly from the start, which can have more financial ramifications than anything else they will do. That's people I guess.

Giftcard

What's your corporate capacity? Without using your correct corporate capacity you are transacting business on your own behalf not the corporation's. So no matter how your company is set up your liable.


Basicly if you signed anything like this

We Need Help, Inc Jack Bower - Owner

Its wrong.

Inc's are "officers" CEO V.P. etc

LLC's are members or Managers

If you say I no check your web site and your sig on this site.

Mike Finley

Thanks once again.

I'm going to run your post through babel fish and get it translated into English, then I will check all my past contracts I've signed and make sure they were signed with my real name and not one of my stage names Mike Spallsitch or Jack Mehoff.

orson

Here's one good reason to set up a corporation (including LLC's, yes, they are corporations too) as soon as you can:

When you set up your corporation many entities, including banks, will require you to open new accounts and treat you as a new business entity, even if you are a ten year old sole proprietorship that is incorporating. Trust me, I found this out the hard way.

PS- Mr. Spallsitch you were incredible in 'Attack of the Killer Ball Sack'. May I have your autograph?

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Giftcard

If your name is Mike Finley and you have made representation of yourself as

Mike Finley - Owner
Rocky Mountain Bathrooms, INC

Mike Finley is liable for the corporations debt. Clear now. Check your site mike home page and contact page. So what good was it going to a lawyer or an accountant to set up an entity if your still liable.


Let me make it real clear, Mike Finley is not the owner of Rocky Mountain Bathrooms,INC if he doesn't want to be personally liable he's an officer of the corporation.

I'm the man Ive been to lawyers and accountants and this and that, whatever was my point from my first post.

Mike Finley

Thanks, for finally writing clearly! 3rd time was the charm.

I now understand what you are referring to. But I'm not worried about it, but thanks for the heads up anyways.

asnider

Ha. I paid even more and I didn't get the darn stamp. I got ripped off

__________________
Adam Snider
Opus Magnum Software - Creators of EZJOB
Construction Software Reviews & Articles

Cache

Don't get too down on yourself. It costs $250 more in your state to register an LLC. I would expect a basic filing service to charge somewhere around $700 in TX.

Anyway, I'm not trying to be insulting here, it just seems that people are blowing things out of proportion a bit. We need to keep in mind that we are talking about small business here, not public corporations. I think much of it has to do with the numerous books on the best seller list advocating supposed tax avoidance and asset protection entities. These strategies are designed around making it seem like there are extra advantages to certain structures and not in others. That used to be the case when LLCs were the new kid on the block and the State tax authorities and IRS weren't as concerned about the money they were losing, but not anymore. Suddenly these "tax avoiding" entities were revealed as "tax evading" entities. The exceptions are found when we get into publicly traded corporations. Then states like Delaware offer certain advantages, but for the small business owner, no such luck.

asnider

Well, that makes me feel a little better.....I guess I will retract that lawsuit I just filed against LegalZoom for taking advantage of the ignorant.

Anyway, I agree. For small business, there is really no sense in getting worked up about it all. Just file the LLC, and let it flow through just as if you were a sole-proprietor. Unfortunately, in Texas you have to pay state uneployment even on members of the LLC.....and we have a franchise tax.

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Adam Snider
Opus Magnum Software - Creators of EZJOB
Construction Software Reviews & Articles