| 11:33 pm on Mar 9, 2012 (gmt 0)|
I recently switched from Sole proprietor to S-Corp. Massive paperwork headache for what I hope will turn into some significant tax savings. My experience (Hawaii) was that all the forms were available for filing online through the state DOT, and getting an FEIN from the IRS to use instead of your SSN takes less than 10 minutes. The form filing is the easy part. Keeping up with all the additional reporting and tax payments is the headache (my experience thus far with an S-corp, will be different for LLC).
| 12:56 am on Mar 10, 2012 (gmt 0)|
Unless you're moving some real money, anybody I have talked to didn't recommend switching. Just not worth all the hassle. But if you have family that will do it for free and you think you can keep up with the extra paperwork... What the heck. I would love to have family do anything for me, other than whine and expect me to fix their problems.
| 8:18 pm on Mar 11, 2012 (gmt 0)|
Are there a lot of extra paperwork requirements for an LLC compared to a sole proprietorship?
Are there tax savings associated with an LLC compared to a sole proprietorship? I thought the goal was to protect your personal assets.
| 12:43 pm on Mar 12, 2012 (gmt 0)|
I thought the LLC thing was for protecting assets, not tax savings, because with an LLC, you pay self-employment tax on the net, just like with a sole proprietorship. In contrast, with a corporation, you pay self-employment tax only on salaries but not on the corporation's profit, where you pay corporate tax, which is less. Thing is that with folks like us, most of the time there's isn't going to be any corporate profit, only salaries.
Corporations you have to file corporate minutes every year and in my state pay a minimum corporate tax, which is $100. You don't have to file annual papers with an LLC, but I don't know what it's like to file taxes with one.
| 1:32 pm on Mar 12, 2012 (gmt 0)|
Yes, a LLC is mainly about separating the business from the rest of your assets. I personally enjoy the tax write-offs.
| 5:02 pm on Mar 12, 2012 (gmt 0)|
LLC separates your business and personal but the income is still pass through. After your LLC is formed, you can still tax file as an S-Corp (which an LLC can be too) and then you are an employee and you run less into tax issues. There are not that many tax advantages (IMO) when you are small - except you can take some expenses as business expesnes and get mileage reimbursement.
| 4:51 pm on Mar 13, 2012 (gmt 0)|
Got it, it sounds like there isn't much tax savings for a small LLC. Is there any extra paperwork or other stuff for an LLC compared to a sole proprietorship?
| 4:25 am on Mar 15, 2012 (gmt 0)|
Nolo makes some great books that will compare sole proprietorship to LLC and S-Corp. I highly recommend spending the $20 or so on a Nolo book that can help you make the right choice.
| 2:58 am on Mar 17, 2012 (gmt 0)|
I just read this:
"In order to maintain the separate form of the LLC and maintain the liability protection of its members, LLC owners must carefully maintain separate records and keep personal affairs separate from the LLC's business. Even more importantly, the LLC's money should never be intermingled with personal money."
Does this just mean keeping separate bank accounts and credit cards for business use and personal use?
| 2:40 pm on Mar 17, 2012 (gmt 0)|
Tonearm, essentially yes. It is also good if you can separate even more - avoiding signing your personal assets for business needs, etc. From a liability standpoint, you want to avoid anything that would allow a potential piercing of the "corporate veil" that protects your personal assets. However, I find this very difficult in practice as often when dealing with other businesses (leases and such) they demand a personal guaranty unless you are a fairly large company.
Regardless of the business entity format you choose it is good policy (essential) in my mind to keep separate records for your business versus personal. You cannot easily get a true picture of your business if it is intermingled with your funds. I have separate Paypal accounts for selling and buying. Occasionally I get mixed up when purchasing a non-business item and boy does it create a hassle from a bookkeeping standpoint.
| 3:51 am on Mar 18, 2012 (gmt 0)|
When you say "avoiding signing your personal assets for business needs", do you mean as collateral?
I actually find it pretty easy to deal with both personal and business expenses mixed up on a credit card. I have to categorize each transaction in the ledger anyway, so I just categorize a person expense in a personal expense category and a business expense in a business expense category. The software takes care of the rest. Am I missing something?
| 8:55 pm on Mar 20, 2012 (gmt 0)|
|I actually find it pretty easy to deal with both personal and business expenses mixed up on a credit card. I have to categorize each transaction in the ledger anyway, so I just categorize a person expense in a personal expense category and a business expense in a business expense category. The software takes care of the rest. Am I missing something? |
That's fine, it just becomes a nightmare if you're trying to write off any credit card interest or other fees.
As for using a non-frills website or your lawyer father, to quote you, am I missing something? :-)
| 3:34 pm on Mar 21, 2012 (gmt 0)|
|As for using a non-frills website or your lawyer father, to quote you, am I missing something? :-) |
Point taken, but I know LegalZoom has (much!) more experience with LLC's than my Dad.
| 2:25 am on Mar 23, 2012 (gmt 0)|
You don't even need to use legal zoom to form an LLC, you can do it yourself on your state's web site. Your state should have a division of corporations or something similar.
I also applied for an EIN on the IRS web site.