|Basic Self Employment Questions|
DBA vs LLC, Insurance, EIN, etc
I have a few questions, first let me give you a brief background...
Right now all I do is promote companies through their affiliate programs. I do this full time, and have been so for about 2 years. I have no 'legal' paperwork, but have been filing as a home business the past 2 years. Now that my business is starting to profit a bit more than it has in the past, i'd like to take the proper steps. After doing some research this is my plan, any advice on what I plan on doing would be fantastic!
1. DBA vs LLC
- Because I don't have any business loans, deal with customers, or have employees, my plan was just to get a DBA certificate. As much as i'd like an LLC, it's about $500 in my state (Mass). I have family in NH were it was in the $150 range I believe, but I don't feel like faking anything, or setting up a business up there. I'd rather just stay in my state and get a DBA certificate because that's all it sounds like I need, correct?
1.a) Any reason I should just go for an LLC instead?
1.b) What trusted places are there online to get either? I've seen numerous sites that offer you the service to do it for you, but I never know what to trust.
- I was told recently that if I got insurance, I could write it completely off, and I assume that would be easier if I got an LLC or DBA. The only problem is, solo health insurance is expensive. I can get what seems like a basic emergency package for $250/month or so from BCBS, but that doesn't even cover prescription costs. I'm relatively healthy, so my plan was just to put about $300/month into a savings account and call it my insurance fund. If something happens, I dip into that. Only negatives will be something serious, which is always a risk. I'm really stumped on what I should do, I don't want to pay $500+ a month for a potential 2-3 doctor visits a year which would probably barely top $100 each. I also don't want to set myself up for a big debt if something goes wrong.
2.a) Should I take the plunge and get Insurance, or just do the bank account route (btw, this is only for the next year. I believe in mid '07 health insurance will be required in my state)
2.b) Any recommendations on companies, plans, or even self employed groups that get discounts? I checked out NASE, but they seem pretty bad. I'd like a legit group that gets real health insurance from one of the big companies.
- Should I get one of these? It would be great to start my own company credit history and start completely separating my personal income from business. It also doesn't seem very expensive to get one. I can't think of many drawbacks to getting one, are there?
3.a) Like I said above, any drawbacks
3.b) Where would I go to get this done? I guess this is similar to question 1.b
- Am I missing anything else i'll need to officially start a business? Business license or anything that isn't mentioned much?
Thank you in advance for reading and any replies I get!
>> What trusted places are there online to get either?
In most states you register a "dba" or fictitious business name with your county clerk's office. Sometimes there's also a requirement that you publish a legal notice in a local newspaper.
As for creating an LLC, I don't understand why anyone would pay someone else to do it as opposed to simply registering directly your state (usually with the Department of State or its equivalent). It entails answering four or five questions and paying a fee. When you pay someone else to do it you answer the same questions, then they simply copy your answers on the form you could have used yourself (physically or online), and collect an additional fee from you for all of their hard work.
>> It also doesn't seem very expensive to get one.
Get it with one phone call to the IRS, and it costs nothing.
>> Business license or anything that isn't mentioned much?
Whether you need a business license depends on local ordinances at the city (usually) or county (sometimes) level. Check with those authorities. Usually if you're not within the incorporated limits of a city, a business license isn't necessary.
|2. Insurance |
- I was told recently that if I got insurance, I could write it completely off,
As long as you're making a profit, you can write it off. (You can write off your insurance expenses, up to your amount of profit- comes right off the front page of your 1040.)
Not paying money for insurance is generally a good idea. Up to just before the point when you need it! :(
Look into catastrophic insurance- basically a very high deductible (a few thousand dollars), but it will cover you for huge expenses (like extended hospital stays, major surgery, etc.). You should be able to get it for much less than the price quoted by BCBS. You may also qualify for a Heath Savings Account for additional tax savings- talk to your tax preparer for more details about your specific situation and any peculiar laws Mass. may have for HSAs.
You mentioned that all you currently do is promote companies through their affiliate programs. Do you plan on jumping deeper into web design, coding, going after web design contracts, etc.?
|1. DBA vs LLC - Any reason I should just go for an LLC instead? |
Really depends on how your company will be shaped. Will there be employees in the near future? Are you looking for tax breaks? If so, I would consider an LLC. But you could always go for an LLC later if need be.
You'll at least need the DBA to setup business checking accounts. This way, folks can make payments (write checks) to your business name instead of to you. Looks a bit more professional that way.
Plus, with a DBA - you can still file a personal tax return and include your self-proprietor content on it...(with a Schedule attachment).
|What trusted places are there online to get either? |
Tons of online resources for LLC information, but you can do both locally. Like JayC said, you'll have to register your DBA or fictitious business name with your county clerk's office. This can usually be done online.
You may have to get your DBA certificate notarized and as mentioned, listed in your local newspaper for a small fee.
BCBS is rather pricey and have been for decades. You may not even want to pay the deductibles for any health insurance, but I would look into UnitedHealthCare and Aetna's individual plans.
|3. EIN - Should I get one of these? |
Definitely. Your EIN will be assigned by the IRS and listed along with your business name. Plus, if you eventually switch to an LLC, you will surely need the EIN and can retain the same one.
You can check the IRS website to get started with your EIN application: [irs.gov...]
As mentioned in a previous post, this isn't necessarily required unless there are some zoning regulations in your county/parrish that requires it.
1. DBA vs LLC
LLC offers some liability protection, and the ability to have multiple owners like a partnership. If that's not an issue stick with DBA, it's easier to deal with and skips the $500. You can print out a DBA form online and take it to your local city all. Don't do it online, they don't know what they're doing. They will just go on the same website you would.
2. Banking: get an EIN first thing. It's easy and free (not to mention instantaneous if you do it online) and you will regret it later if you don't. Then get a business bank account under the EIN.
3. Get health insurance. It is nuts not to.
If you get an LLC in Mass. I believe you are required to have $200K in general business insurance / errors and ommissions, or something along those lines. Check with a professional.
Great reading so far, thanks for the tips..
To answer one question above. I don't currently plan on going deeper as far as web design, dealing with customers or any of that. I plan to stick to the promotional route of affiliates for now, just try to get deeper in that, but it's basically the same as what i'm doing now.
I will have to look into cheaper insurance. My backup plan was to put aside $250/month or so into a savings account as an emergency fund, pretty much paying my bank instead of an insurance company, but then I realized I can't write that off and i'll end up paying taxes on it anyway. So what I may do is look for a cheaper 'emergency only' type of health insurance that isn't too expensive and only covers major things, then just pay for doctors visits and stuff like that out of my pocket. The beauty of that is many are willing to give our prescription samples if they know you don't have insurance, so I can also save money there.
If I ever have to go on a regular type of medication, then I may have to start thinking of a better insurance plan, especially if it's upwards of $100+ a month for the pills.
Thanks again for the tips, i'm definitely going to do the DBA route and get an EIN. Just gotta look through the many options for health care.
|If I ever have to go on a regular type of medication, then I may have to start thinking of a better insurance plan, especially if it's upwards of $100+ a month for the pills. |
That's too late to make that decision. What makes you think you are going to get a good rate - or even be insurable for all conditions - when the insurer knows that you have a chronic condition?
As with ALL types of insurance, the key to reducing premiums is the deductable. The higher the deductable, the lower the premium, and the curve is far from linear. You really save by increasing the deductable, or you really pay through the nose for a low deductable (depending on your point of view...)
I've had a Blue Cross PPO with a $2500 deductable for several years. I find that I consistently pay less than friends with have HMOs and constantly complain about the service from their HMOs. (The most frequent complain is the use of a primary-care physician as a "gatekeeper" - resulting in delayed treatment and unnecessary repeat visits to the primary care physician.)
I'm considering switching to an HSA plan, as these are an even better deal. In addition to providing a mechanism for covering the deductable (the savings plan) the rates are even better than those for a regular high-deductable PPO.
|That's too late to make that decision. What makes you think you are going to get a good rate - or even be insurable for all conditions - when the insurer knows that you have a chronic condition? |
I've looked around, and so far BCBS offers the best plan I can find. It is pretty much an insurance only plan and I pay my own prescriptions (I get some sort of discount though), but it will be better than nothing. It's roughly around $250/month I think. I wonder if I can get it cheaper with a higher deductible like you said.
My main goal is to get something, which I have to do due to the upcoming law. I have a question though, can I change plans easily once i'm covered, or do I have to go through tests, and reviews for every plan change? Thanks!
|I've looked around, and so far BCBS offers the best plan I can find. |
I have a BCBS plan, "Individual PPO Share 2500". I pay about $350/month at 51. I know people who are younger and paying nearly twice as much. It DOES include prescriptions, as well as office visits with only a co-pay. (The deductable is only for procedures.)
It looks like I can get an equivalent HSA plan (also from BCBS) for about $250, though. I haven't really looked into it carefully yet, though, so don't know what differences there might be between the plans.
I guess they figure that with the HSA, you will be more likely to seek preventative care, and lower the rate accordingly.
You can generally switch plans within the same system with no special qualification. Do get a good plan while you are healthy. It's generally doen with only a questionaire, which I'd caution you to answer honestly. They may or may not check your medical records when you apply, but you can be darn sure that they will check when you need the insurance.
Let's say 10 years from now you have a heart attack. You can be sure that they will then investigate, and make sure you were not lying when you said on the application that you had no history of heart disease. Some insurers would rather collect premium for 10 years, then deny the claim, than to just turn you down in the first place.
If you have chronic conditions, it's common for them to be excluded, or else your premiums will be sky-high. Better to get the insurance before you develop any chronic conditions. They can't just switch it on you once you are insured, as long as you have "guaranteed renewal".
This is one of the big advantages of being self-employed. You get to choose your own "permanent" medical insurance. With employer-provided insurance, you can, at some point, find yourself locked-in to having an employer for the rest of your life. You will always be insurable on an employer's group policy. You won't always be insuranble on an individual plan. Thus, if you develop chronic medical conditions, you are then locked-in to the employer-employee system for life.
|This is one of the big advantages of being self-employed. |
|You won't always be insuranble on an individual plan. |
Huh? Being uninsurable is a big advantage of being self-employed?
|Huh? Being uninsurable is a big advantage of being self-employed? |
No, not quite what I meant. I certainly don't like the system we have in the U.S. But as long as we have it, best to understand it and utilize it to your best advantage.
It is true that you can be turned-down for individual insurance, and/or have limitations on insurable conditions.
On the other hand, (providing you get insurance that has a guaranteed-renewability clause) it is PERMANENT insurance. It cannot be taken away from you.
With employer-provided group policies, you are at the mercy of your employer. You lose your job, you lose your insurance. There is gap coverage by law, but it has a time limitation and is generally expensive.
What if you have to stop working due to a medical condition? That is the ultimate catch-22. Fortunately, I haven't ever been in that situation, so I am unfamiliar with the laws. Do employer-provided insurance plans continue in the case of permanent disability? Or are you then on your own groveling for what insurance you can get?
One thing I would like to see happen is for employers to provide the option of the employee bringing his own coverage - that is, some sort of salary credit for not taking the employer's insurance.
With regard to medical insurance (which to many people can be a very major factor in choosing a workstyle) it's best to make the decision to become self-employeed while you are young and healthy. It's too bad it has to be such an either-or can't-necessarily-go-back decision.
With self-employment, you get something that you can't get in the conventional workplace in the U.S. today - a guarantee that your employer won't pull the insurance rug out from under you.