Forum Moderators: phranque
What forms would I need to start a business? (i.e. Trademark, Copyright, Registering the name, Insurance ...) Could someone please guide me?
just file for an LLC and treat it, like it were a friend of yours with its own life.
An LLC has its bank account, its own car, its phone line, etc.
note all expenses (don't ever give a dollar away without a receipt) and just change hats when you need to.
very simple and any (cheap) lawyer around the corner should be able to file that for you in no time or you do it yourself online!
P!
If N/A ask your bank they will know about such similar groups.
However do not start anything without
a sound business plan
a sound marketing plan
Know the cost of setting your biz upfront
PLUS do you have one year of life+biz-expenses in reserve?
Sole proprietorships can expose you to unlimited liabilty of your personal assets.
But dont you have to pay a yearly fee?
The fees and state taxes you pay depend on the laws of the state where you set up your LLC as well as where you owe state income taxes. You can set up your LLC in a different state from where you live but you may still have to pay taxes in your own state as well as where your LLC is set up.
In some states it can be expensive to set up an LLC if you only make a few hundred dollars a month, but still important to do if you have personal assets, such as equity in a home or retirement savings, you wouldn't want to lose in a lawsuit.
On the other hand if you have lots of business income from different sources, then it may pay to even set up multiple LLCs or corporations. Then if one business entity is sued then usually only the assets owned by that one business entity are at risk.
Would it be worth it if you make only several hundred dollars a month?
That may not be the best question to ask. It isn't necessarily how much you make that is the key question in setting up a separate business entity with limited liabilty, but instead consider the value of your personal assets that you are exposing to risk if you don't make your business a separate legal entity.
[edited by: Jane_Doe at 3:38 pm (utc) on May 29, 2007]
I used one of those websites that get you set up for a few hundred bucks. Very simple.
An attorney should also be able to do this for you for "a few hundred bucks".
While it's useful to do some research in advance, I'd suggest consulting both an attorney and a CPA - preferably ones that you have worked with in the past and whom you trust to guide you in your best interests.
Consult with a CPA regarding the form of business that is most appropriate for you. An LLC may not be the best - perhaps an S Corporation will be better for you. With LLCs, many states have "check box LLCs", with many options to choose from. While this makes it easy to do the filing paperwork, you really need professional help to check the right boxes for you!
If you expect to derive significant income from your venture, you should discuss tax and retirement planning with your CPA at the same time, as this may affect your choice of business form.
I am trying to determine if I should switch from a Sole Proprietorship to a LLC
I resell small electrical appliances through an online store
I purchase them from a distributor in the US and they are manufactured in Asia
I stock and ship some and I some I have drop shipped
I am the only owner and worker in my business.
I have product liability insurance for $500,000 and a $1,000,000 personal liability policy
Is my liability from an injured customer the same whether I am a LLC or a Sole Proprietorship?
Last year my Sole Proprietorship made a taxable profit $75,000 and I paid @ 15% for the SP Tax or @ $10,000
Could I have paid less tax if I were a LLC or other kind of Corporation?
How much higher are fees and taxes and cost to prepare the reports for the fees and taxes for LLC vs. a Sole Proprietorship?
Thanks
Ric
Question #1: "I'd be interested in knowing why you chose a Sole Proprietorship. I am trying to determine if I should switch from a Sole Proprietorship to a LLC."
Answer: The biggest benefit to small businesses is liability protection. Consult a lawyer, but basically you have a "shield" from getting sued personally for legal problems that arise during the course of business. In most cases you can only be sued for the assets IN the LLC. (They can't sue you for your personal residence or car.)
Question #2:Is my liability from an injured customer the same whether I am a LLC or a Sole Proprietorship?
Answer: No. An injured customer would sue the LLC. LLC's are separate entities. That's why you get protection.
Question #3: Could I have paid less tax if I were a LLC or other kind of Corporation?
Answer: You probably would not have paid less income tax. In fact, for federal purposes, if you are a single-member LLC (you have no partners) then there isn't even a different form to fill out on your Form 1040. Sole proprietors and single member LLCs both use the schedule C.
Question #4: How much higher are fees and taxes and cost to prepare the reports for the fees and taxes for LLC vs. a Sole Proprietorship?
Answer: It depends. Like I said before, there is no difference for federal purposes. BUT, most states charge an LLC fee. For example, in California, you have to pay $800 annually for your LLC whether you have any income or not. On top of that you have to pay additional taxes depending on your revenue. (So basically it's like purchasing a comprehensice insurance policy for $800 + an additional fee depending on your revenue.)
That's it in a nutshell. I highly recommend talking to a CPA/Lawyer. If you're more of a "do-it-yourself" kind of person though, then the forms you have to fill out to create an LLC are usually really easy to figure out. There's a lot of good books out there to help you, plus I'm sure your state tax board has a phone number you can call to get advice.
Question #1: "I'd be interested in knowing why you chose a Sole Proprietorship. I am trying to determine if I should switch from a Sole Proprietorship to a LLC."
In regards to Question 1:
I thought (Sole Proprietorship + Insurance) would be cheaper than LLC.
I thought (Sole Proprietorship + Insurance) would be cheaper than LLC
As previously explained, Sole Proprietorship + Insurance!= LLC.
First of all, you can't cover every possible risk with insurance. Some are un-insurable. Some you may not have thought of. Liability isn't the only potentially ruinous financial situation you may run into in business.
Secondly, there are additional benefits of having an LLC. For example, you may be able to avoid paying all or some social security tax, by arranging to receive distributions rather than salary. (But talk to your CPA, because you may actually WANT some W-2 income. For example, it's needed to qualify to contribute to a retirement plan.)
