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easy.
pay the atty to do the paperwork
pay the cpa to do the taxes
If either one screws up they're with me in court being the responsible ones, mostly. The cost of each wasn't worth the time & sweat of my own to do it myself plus the aforementioned responsibilities they take on.
Thanks for your reply. I have a friend that’s a sole proprietor that says he won’t incorporate because there’s annual paperwork, such as minutes for an annual meeting that must be filled out. Is this so, and is there any other paperwork I would have to be prepared to do myself?<!----><!----><!---->-T
Don't have to have a meeting as such or any other stuff, but if you're looking for protection as a 1-man LLC follow what Ponytail says and get lots of insurance and a good atty. Since you're the CEO and the peon of a 1-man LLC your responsible for everything if an issue with a client were to boil into court.
Cost me $500. My accountant handled all the logistics. I just signed the paperwork.
He charges me an additional $375 for processing the LLC portion of my return.
I wish I had a reason;
my flaws are open season
Thanks for your response. The annual cost of $375 seems almost inconsequential to me when I think of what I could lose if I wasn’t incorporated. People, especially rich people, are so sue happy these days. I do plan on non-binding-mediation clauses, as well as other additional similar clauses in my contracts, but I want all the security I can get. However, should I be prepared for higher taxes and/or a reduced amount of deductions as an LLC?<!----><!----><!---->-T
I'll give you the same free advise that was given(by a beer drinking 'Bad Company' tee shirt wearing lawyer) to a bunch of us at the last 'fest. Your best defense is to not get sued.
There is very limited protection for a small business owner no matter what umbrella we operate under.I wish I had a reason; my flaws are open season
" The annual cost of $375 seems almost inconsequential to me when I think of what I could lose if I wasn’t incorporated. "How do you think that a corp or LLC will protect you? And protect you from what?.
.
A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
Yes, your business insurance will offer more protection than the formation of an LLC or S corp.
When you're this good, EVERYONE wants a crack at you!
http://www.petedraganic.com/
What John7t said...and...
I paid an atty less than 300$ to start the LLC and about 80$ this year to keep the reporting up to date--he files once and bills once.
Taxes are a breeze as all LLC income flows into the tax world via ME the owner of the LLC. My wife and I file jointly so I do my books for the business and then give all that and her W2 and all our other houshold deductions, mortgage interest and whatnot, to the accountant.
I pay the acct less than 200$ for her service.
Thanks for your participation. About this reporting that your attorney keeps up to date, what paperwork do you have to provide him with each year for him to do so?<!----><!----><!---->-T
(Sorry Late)
I don't provide anything, as far as I know... I wasn't asked for anthing. I rec'd bill for 50$ for filing an annual report. I don't know what is contained therein... Could probably figure that out and do it myself but why? We'll see what comes of next year.
And looking back it cost 250$ to have him set up my LLC.
Depneds how you set the LLC up.
If you choose to be taxed as a "disregarded entity" it's about the same as if you were a sole proprieter.
If you choose to be taxed as an S corp, you have to file two tax returns - one for the comany, a seperate one for yourself. - There are definate advantages to this structure though - your accountant can explain them to you.
We split our business into two seperate LLCs effective Jan 1rst. One is taxed as a disregarded entity, the other an S corp.
Remodeling contractor who once visited the Glass City.
Thanks, your comments are very helpful. I wasn’t aware that there were different kinds of Limited Liability Company’s. Of what benefit is a “disregarded entity as opposed to “S†corp. LLC?<!----><!----><!---->-T
A disregarded entity is virtually the same as a sole proprietership for tax purposes, ease of books kept, reporting. If you've been running a sole proprietership you can shift right into a disregaeded entity and more or less carry on as before. Any profits the company make are considered income to you and you pay self employment tax on it, just like a sole proprieter does.
If you are taxed as an s corp there are several tax advantages. You decide how much to pay yourself. That pay is subject to self employment tax. Any profits the company earns above that are then "dispersed" at your discretion. The company pays tax at the corporate rate, you pay income tax on the money if you disperse it to yourself, but you don't pay self employment tax on that money.
Also, you might consider how much you intend to capitalize your company with when you set it up. If you capitalize it for the minimum, say 500 bucks, then sell it for 50k 10 years from now, you'll have to pay capital gains tax on the difference.
It gets a little complicated. The best thing I did was find a lawyer I trusted, who was knowledgable in these matters and met with him a few times as all this sifted through my head. I tried and tried over the past few years to get a handle on it here at Breaktime, talking with other contractors, reading. It took me a long time to get it straight what was going to work best for us.
The other key team member is your tax advisor. Between her and my lawyer, and several hours of discussion with them, it all started making sense.
It's not something to be taken lightly. Invest whatever time and money you need to to insure you understand not only WHICH form meets your needs, but if an LLC is what you really want in the first place. Lots of people are better served with other business forms. Remodeling contractor who once visited the Glass City.
Jim, I believe you pay "self-employment tax" one way or another.
If you work for a company with taxes taken out, you pay (iirc) 7.65% to SS. The company then pays an additional 7.65% to SS on your behalf.
If you are self employed, you pay both halves.
I could be wrong about whether the "self-employment" tax is the method the IRS uses for recovery of that particular tax though but I'd have to go and look... or talk to my wife who used to work for the IRS.
When you're this good, EVERYONE wants a crack at you!
http://www.petedraganic.com/
The difference is that the employee's wages are taxed at one rate, the corporation at a lower rate. The corporation is free to then distribute any excess funds as it sees fit. If the corporation decides to share the profits by distributing them to the employee, the employee pays income tax on those distributions, but not self employment tax.
At least, that's my understanding of how it works here in WA. Remodeling contractor who once visited the Glass City.
Jim was talking about something called a "disregarded entity" for an LLC.http://www.businessknowhow.com/startup/llcfaq.htmDepending on specifics of how the LLC was formed, how it is composed, and what kind of business it is engaged in, the Federal government may or may not automatically classify it as a "Corporation" for federal tax purposes. If it doesn't, then "a business entity with a single member can choose to be classified as either an association taxable as a corporation or disregarded as an entity separate from its owner, a “disregarded entityâ€". As I understand it, in that case, it would be treated the same as a sole proprietorship for federal tax purposes.If the LLC is a disregarded entity, then the owner would pay self-employment taxes.Otherwise, the owner would be paid as an employee, would have his share of the employment taxes (not self-employment taxes, he is employed by the separate entity, the Corporation) deducted from his paycheck, and the Corporation (LLC) would pay its share.Rebeccah
Edited 3/21/2007 8:41 pm by Rebeccah
What she said. (thanks)Remodeling contractor who once visited the Glass City.
since most small corporations usually don't act like "corporations" the protection one thinks he is getting by "being a corporation" is usually just not there or can be broken... the only real protection you have is a great insurance policy... and cash on hand to pay good lawyers... he with the deepest pockets usually with win or break you on the way to your win...
walk soft... fly low... and just avoid trouble... if you can
p
Thanks, that’s interesting. What would I have to do to ‘act like a corporation?’<!----><!----><!---->-T
As an LLC, aside from the filing fees, all will operate the same as it did when you were a sole proprietor. I have an LLC.
As a corporation. you will have a bit more to contend with from the business end. The business truly becomes an entity of its own.
However, if you're doing this because you want to protect yourself legally, it may only help to a small degree, if at all. If you are the primary officer/stockholder, you can be sued all the same from what I understand.
If you are a small operation, I don't know that there is any true benefit to becoming a corporation... it may be more trouble than you'll find worthwhile. The biggest problem being that you won't be able to just use your money as you need to.... you'll have to put yourself on the payroll under some form of a fixed pay rate.
When you're this good, EVERYONE wants a crack at you!
http://www.petedraganic.com/
In Conn. (your state may differ):
$60: submittal of Business Filing form to Secretary of the State
$50: New Tax ID number
$160: New contractors license
$5: Business entity identity filing with town
$250: CPA charge for some of the above
Other changes: New bank accts, vehicle/Liability insurance changed, new business cards/envelopes/stationary/contracts/proposals/etc.
My guy told me to change over everything to the LLC name; advertising, credit cards, accounts, everything. Takes a while, and you can't get it all done in one day, but you do what you can.
Good Luck
"I am the master of my fate, I am the captain of my soul." Invictus, by Henley.
Thanks, I appreciate your comments. I’ve heard it said that once you become an LLC, it’s required that you let all your customers know you’re a Limited Liability Company. What I’m primarily concerned about though, is the paperwork after getting started. Besides the initial paperwork, have you found there to be more paperwork involved in simply maintaining a business as an LLC?<!----><!----><!---->-T
In NH, the one-page LLC annual report (due on April 1, thanks for the reminder) can be filed online. Takes about 5 minutes max, plus $100 annual fee (also can be done online w/credit card). I'm sure it'll vary state to state.
It's a little piece of insanity in Canada that all the licenses, copywrites, TMs, etc. have different renewal dates ! Renewing is harder than starting.
Make sure your accounting software is organized per corp requirements (your accountant/book-keeper will set it up)
Phill Giles
The Unionville Woodwright
Most states will allow you to fill out an LLC application on line. Mine LLC costs $25/year for renewal. No need for an attorney.
An LLC will NOT protect you from your own liability. An LLC (and others) May protect you from acts of your employees.
Taxes can be handled in a number of ways. See a CPA who knows about your overall situation. Paying for an hour of time is well worth it.