Did you Incorparate your business

[hdrider]

What did y'all do... Nothing, S Corp, LLC , Sole Proprietorship ? I want to be able to take some tax deductions at the end of the year

[amc-vending]

Last year I filed a Schedule C under a trade name, this year I setup a LLC c-corp.

[mainor5251]

Sole prop for me but filing LLC paperwork in Dec.

[alyssamma]

LOL, Tax Spokesman?

We had an existing S-Corp that we used. If I were to start over (and didn't have a company already), I would form an LLC.

Kelly got interesting advice. Kelly, I assume you are being taxed as a C-Corp and not S-Corp? In any event, the main advantage Kelly is talking about comes with payroll taxes. There are more advantages with a C-Corp instead of an S-Corp, but unless you are making some serious $...say at least $50K, it really isn't worth the hassle IMHO. Even then, I'd probably hold off until you make $100K.

You have to weigh the time you'll spend doing taxes (or $ you'll pay having someone else do them) vs. the extra $ you take home being taxed as a corp.

Kevin

[alyssamma]

Kelly, Soc Sec = Payroll Taxes. But you don't get that benefit with a C-Corp, just an S-Corp. With a C-Corp the main advantage is (usually) a lower tax rate. I *think* C-Corps are taxed at 15% for the first $50 or $75K. That is lower than the personal rate.

The downside to this is that a C-Corp has the most paperwork and regulations (meaning here stuff you need to do to be "legal").

Also, in *general* it is harder to take $ out of a C-Corp.

With an S-Corp, you can take *some* money out without paying payroll taxes (Soc Sec + Medicare). It has more paperwork than an LLC (which usually has none if it is a single member LLC).

Based on what you said, I am pretty sure he told you to tax it as an S-Corp.

Kevin

[agrantha]

Alyssamma

How much should I earn before setting up an LLC? 

[agrantha]

Kelly

I have a $1,000,000 liability insurance policy for my vending business.  Shouldn't that cover me?

Thanks

[alyssamma]

Check out this link: http://vendiscuss.com/forum/index.php?topic=5975.0

[agrantha]

I thought attorneys only sew a person for what they are worth.  I am only worth $200,000

[agrantha]

Alyssamma

I think you missed your calling.  You should have been a tax attorney. 

[Bender]

So this morning, I was listening to Ray Lucia, financial adviser, answering a question from a woman who is considering forming a LLC for her photography business.  She has no employees.

He told her that since she is doing the work herself, an LLC does nothing to limit her liability.  Since she is the photographer, she is personally liable and she could be sued for the value of her business AND her personal assets.  He added that if she did have employees, and the employees were doing the work, the LLC would protect her personal assets from liability claims, only the LLC would be at risk.

He has also mentioned in the past, that a LLC will not protect the owner of an apartment building in an LLC if the owner does his own maintenance, which opens the owner up to personal liability again, exposing his assets outside the LLC..  If the maintenance were done by contractors and employees hired by the LLC, then liability is limited to assets within the corporation and the owner's personal assets would not be exposed.

If I understand correctly, when properly executed,  a limited liability corporation limits liability to the assets within the corporation.  A plaintiff can sue for the assets owned by the company, but they cannot sue you for your personal assets outside of the LLC.

Furthermore, he told her that the additional paperwork did not justify a corporate structure until she was earning significantly more than the $10,000 per year she is currently earning.

This leads me to believe that it is much simpler and more effective to get an umbrella policy or commercial liability insurance for your business rather than forming a limited liability corporation.

[alyssamma]

Agrantha, thanks. Really, I just like business. However, there is a whole bunch of weird stuff out there that I call my accountant for Tax laws are too complex for a mortal

Bender, I'm not sure of the exact facts of what was said since I didn't hear everything, but I can tell you this...

1) An LLC is a company not a corporation. This is a slight, but important distinction. Corps have things like stock. Companies don't.

2) If you are the only member (i.e., owner - you can have as many emps as you want) in an LLC then there is zero paperwork to do. Well, some states (e.g., FL) have a yearly form you fill out but this is nothing more than sticking your name on the paper and sending in a check. Most states (e.g., Ohio), there is zero paperwork. This is not true for S-Corps and C-Corps.

3) A single member LLC, where the owner does all of the work, is the most common form of LLC. It absolutely provides liability protection. Your understanding of this is correct (almost) - you can only lose what you have put into the LLC.

4) Real Estate is weird. There *might* be some crazy laws about LLCs and doing your own maintenance work. I know there is if you fund your company/corp with your retirement $. I am not aware of anything that changes liability with who does the work for Real Estate, but like I said, that is an entirely different beast.

So, bottom line, form an LLC. There is no paperwork and you'll be protected

Kevin

[alyssamma]

FYI, this is an excellent link on LLCs and it is very easy to read: http://www.limitedliabilitycompanycenter.com/what_is_a_single_member_llc.html

[Bender]

Thank you for pointing that out.

In California, the LLC filing fee is $70, with an $800 minimum annual tax and 15% tax rate.

[alyssamma]

Yeah, some states - like CA and MA aren't very "business" friendly

[Bender]

For your information, see my post in topic "LLC info", with audio and transcript, where a certified financial planner advises that an LLC will not protect your personal assets in any way if you are performing your own labor on your vending machine route:

http://VENDiscuss.com/forum/index.php?topic=5975.msg76842#msg76842

[alyssamma]

I replied on that thread

Kevin

[Limitless76]

Sole proprietorship at the moment.  LLC looks enticing.

[Technivend]

So this morning, I was listening to Ray Lucia, financial adviser, answering a question from a woman who is considering forming a LLC for her photography business.  She has no employees.

He told her that since she is doing the work herself, an LLC does nothing to limit her liability.  Since she is the photographer, she is personally liable and she could be sued for the value of her business AND her personal assets.  He added that if she did have employees, and the employees were doing the work, the LLC would protect her personal assets from liability claims, only the LLC would be at risk.

He has also mentioned in the past, that a LLC will not protect the owner of an apartment building in an LLC if the owner does his own maintenance, which opens the owner up to personal liability again, exposing his assets outside the LLC..  If the maintenance were done by contractors and employees hired by the LLC, then liability is limited to assets within the corporation and the owner's personal assets would not be exposed.

If I understand correctly, when properly executed,  a limited liability corporation limits liability to the assets within the corporation.   A plaintiff can sue for the assets owned by the company, but they cannot sue you for your personal assets outside of the LLC.

Furthermore, he told her that the additional paperwork did not justify a corporate structure until she was earning significantly more than the $10,000 per year she is currently earning.

This leads me to believe that it is much simpler and more effective to get an umbrella policy or commercial liability insurance for your business rather than forming a limited liability corporation.

Only a month late on reading this post. Things have changed since we incorporated back in the early 90's (C corp) but what you state makes perfect sense in the way it was explained to me many years ago.

Basically if you work for ABC company and do something wrong that causes damage either ABC company or the person who was negligent can be the one to be sued. It is usually the company as the company usually has more money. If you are the only employee and take all the assets out of your company and keep them personally thinking there will be no liability you may be wrong. If you were negligent and the company has no money guess who is next on the list, the owner/employee. So in a sense you liability as a single employee is greater then if you have employees.

Employees are not exempt from being sued and being held accountable for negligence. An LLC or any Corp will not provide protection from that.

[alyssamma]

People are confusing some terms and concepts here.

First, it is important to understand that LLCs, S-Corps, and C-Corps all provide different levels of protection. Additionally, rules that need to be followed, in order to get that protection are also different. Lastly, with an LLC, the rules vary (somewhat) by state.

So, you really can't say that because you aren't protected under a C-Corp, you aren't protected under an LLC, and vice-versa.

Also, there is a difference between someone wanting to sue you (see the Eddie thread) and gross negligence. And the important term here is gross.

Let's look at an example. You are happily running your vending company. You do everything by the book. A kid buys a gumball abnd chokes. You are 100% protected by an LLC against being personally sued in this case.

However, if you knowingly purchase stale gumballs and then spray them with bug cleaner for the heck of it and someone buys one and gets sick, then you are 100% NOT covered.

Again, it has to be *gross* negligence.

Bottom line, if you form an LLC, and operate your business the way it should be operated, you are covered.

Kevin

[vending018]

People are confusing some terms and concepts here.

First, it is important to understand that LLCs, S-Corps, and C-Corps all provide different levels of protection. Additionally, rules that need to be followed, in order to get that protection are also different. Lastly, with an LLC, the rules vary (somewhat) by state.

So, you really can't say that because you aren't protected under a C-Corp, you aren't protected under an LLC, and vice-versa.

Also, there is a difference between someone wanting to sue you (see the Eddie thread) and gross negligence. And the important term here is gross.

Let's look at an example. You are happily running your vending company. You do everything by the book. A kid buys a gumball abnd chokes. You are 100% protected by an LLC against being personally sued in this case.

However, if you knowingly purchase stale gumballs and then spray them with bug cleaner for the heck of it and someone buys one and gets sick, then you are 100% NOT covered.

Again, it has to be *gross* negligence.

Bottom line, if you form an LLC, and operate your business the way it should be operated, you are covered.

Kevin

I plan on setting up an LLC...

Pertaining to the highlighted text, you could still potentially lose your business and your business assets like equipment, right?

[alyssamma]

I plan on setting up an LLC...

Pertaining to the highlighted text, you could still potentially lose your business and your business assets like equipment, right?

Correct.