posted on April 9, 2001 08:56:54 PM new
What kind of business are you? Sole proprietorship? Partnership? LLC? I'd like to obtain a business license but I'm not sure what form my business entity should take. It would be home-based and part-time, so a sole proprietorship seems to be the most appropriate, and certainly the easiest, route. However, LLC status is tempting because of the limitation of liability, and knowing my personal assets aren't at stake if the business were to be sued.
If you don't mind sharing, what's you arrangement, how complicated was it to set up and maintain, and how is it working for you?
posted on April 9, 2001 09:03:44 PM new
We are a sole proprieter. Husband and wife team and we report several different endeavors on the same schedule C.
It's relatively simple to set up. Any accountant can take care of it for you if you don't feel comfortable doing it yourself.
posted on April 9, 2001 09:23:51 PM new
Rainy Bear,
You can run a web search on "incorporation" & find all kinds of places with information. You might want to also check out the IRS website (after tax day, that is) and read up on the tax implications.
I like LLC because you basically have the same flow through as a sole proprietorship but have the limited liability. But it does cost more to set up & it may not be right for you.
posted on April 9, 2001 09:48:05 PM new
Well, just when I thought the sole proprietors had the unanimous vote, along came eventer with a preference for LLC!
I've done some research about the different business types, but every time I start to get into it, it all just seems so complicated. It's really time for me to do this, though, so I need to get it all straightened out in my head, and on paper.
srfnfshn - when you say you report several different endeavors on the same Schedule C, do you mean that you have multiple business licenses for different things, or multiple endeavors under the same business? This will apply to my situation because I plan to have multiple endeavors, too.
posted on April 10, 2001 12:58:29 AM new
You can have ONE business license and have DBA's (Doing Business As) which you must file Ficticious Firm Name papers with your local business department. Call them up and hopefully you get someone who has the time and interest to answer your questions. Depending on your income level you may opt to be incorporated but this still requires you to have a busines license and FFN papers. You can get the coproration papers started which will be several sets of paperwork (which must be filed one after the other after you get the 1st set of papers back) done over about three to five months and have a current business (with license) brought into the corporation at time of starting the corporation or anytime later. If you purchase a "packet" on incorporating from Office Depot/Max it will be very helpful. Just dont let all the paperwork get to you...it is quite simple and can easily be done yourself. Just call the phone numbers over and over until you get the answer you seek about them. The packet will have sample applications and forms filled out which will let you figure out just how simple and non complicated they are. Good luck!
posted on April 10, 2001 05:13:37 AM newRainyBear,
We just lump my things toether and the hubby's things toghether, report all the income on one schedule C and call it something like Srfnfshn's Widgets & Smileyfaces.
It's interesting that you brought this up because we just spoke with out accountant the other day about the possibilty of incorporating and she felt it wasn't necessary.
As long as you keep your last name as part of the business name you don't have to fool around with any of that ficticious name stuff.
Honestly, if you have any doubts find a reasonably priced accountant, go over some numbers and have him/her set it up fo you. I think ours was about $75.00 to have everything done, but don't quote me. We do everything else ourselves. (Income taxes, sales tax reporting etc.)
posted on April 10, 2001 05:26:03 AM new
Hi,
I've been mulling over this same thing. I've always had an accountant even as a nurse, my husband is a computer guy. We had home office and other stuff to deal with.
My accountant always wanted me to incorporate, for a variety of reasons and I did talk to him about this last year in reference to E-Bay around tax time and was supposed to get back to him again (but haven't). He was going to charge me 500/year to set it up and maintain, do all filings paperwork and attend audits if necessary along with doing our tax returns each year.
I know there are kits you can buy, and when I lived in Florida you could do it yourself for under 100.00.
I also wondered if anyone is incorporated in a state other than their own. Aren't there different rules from state to ste for Corps, that might be advantageous over your own. Probably not for small sellers but for some of the bigger folks.
posted on April 10, 2001 06:43:53 AM new
If my memory serves, the state to incorporate in is Delaware - they have the most advantageous system to incorporation...
posted on April 10, 2001 06:56:56 AM new
IMO, incorporation or LLC status really isn't necessary unless you're doing fairly big business on eBay or elsewhere. Liability is extremely limited on eBay...what is a disgruntled buyer going to do? Sue you for the $50 widget he didn't receive? The costs and complexities of filing corporate taxes make this a most unappealing option unless you're getting some real, tangible benefits...which most of us smaller businesses won't receive.
OTOH, my husband is a sole proprietor in a profession that exposes him to a good deal of personal liability. We've considered incorporation of his business for that reason (still haven't actually done it). From my reading, Nevada is a good state, along with Delaware, if you're looking for inexpensive taxation and minimum paperwork.
As somebody else pointed out, a business license is strictly a local item, and doesn't depend on what form of business entity you operate under. They are usually very inexpensive (mine are $25 a year each, until my income is over $50,000 and then it's a minimal percentage).
A DBA is another separate and local item. You only need one if your business name is not the same as your personal name (i.e., John Smith Auto Parts versus XYZ Auto Parts). You file for this once (very minimal fee again), and renew it every 5 years or so.
posted on April 10, 2001 10:13:52 AM new
Thanks for your replies. I think I'm going to start out as a sole proprietor and, if I ever need to, I'll incorporate or look more closely at the LLC business structure. I'm starting out small, so may as well keep it simple as well!
posted on April 10, 2001 05:12:40 PM new
Rainy Bear:
We are an C Corp. since this is our entire business. If you have other income such as a day job you might want to consider an S corp. Both offer you the same protection. The S corp offers the advantage of flow through for both profits and losses so you can juggle that against your day job earnings.
Statistically C corps are audited less often than any other type of arrangement.
LLCs in general are too new to include in the statistics that I have available to me. Although I have to say that they were attractive.
Someone mentioned the state you are considering incorporating in....and they are correct. Deleware and Nevada offer very attractive situations. I haven't looked on line but your local library or book store should have how to books for both those states and they should tell you what their advantages are.
The paper work is really not that bad so don't let that sway your decsion too much.
posted on April 10, 2001 06:40:38 PM new
I favor LLC status. Even if you're small, this allows you to create a separate entity, which provides liability protection and a second identity to do business "stuff", e.g., obtaining a reseller license. The paperwork is very simple, if it's a single member LLC (i.e., only one "shareholder". You'll still report income on Schedule C -- no separate returns, since the IRS treats single member LLCs as disregarded entities. If the LLC has more than one member, though, the accounting increases substantially, including the requirement for an annual K-1 partnership return that'll likely run you $1,000.
FYI, for the poster who referenced an S corp., I don't think you'll find a single lawyer or accountant today who'll recommend it. I've consistently heard it referred to as malpractice. If you do encounter a professional who does recommend an S corp., I strongly suggest you switch professionals: it can only mean that they've failed to keep up with their reading.
Yes, the jargon means I know too much about this. And no, this is NOT legal advice on which you should rely.
posted on April 10, 2001 07:26:09 PM new
Delaware is the state that every major company incorporates in because of their laws related to business contracts and incorporation.
The only reason why people incorporate is when they want to limit their liability. Most people selling stuff on ebay don't need to limit their liability but if you are selling things that could remotely cause injury or damages you should incorporate. Many states require places that sell food; professionals in dental, medical, law, accounting; to incorporate.
My suggestion is to either stay S.P. with DBA or create an LLC. The downside to anything beyond a S.P. is that their are complex tax issues that will need an accountant to deal with. If you put yourself on payroll your state may require you to have worker's comp insurance.
Make sure that all funds and purchases have a paper trail associated with them by depositing all checks and money orders in the bank, and ACH with paypal. If you ever get audited you will have a great paper trail.
I spoke with an attorney for about 3 hours about 8 weeks ago and he suggests that unless there is a reason to create a corp, don't. S.P. firms can simply purchase liability insurance to cover any risks.
There are huge tax issues involved so I suggest that you get a book at the library to help you decide.
