LLC and Sole Proprietor for the small businesses

BIG WOOD

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Feb 4, 2016
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Matt w.
After 16 years, I'm finally upgrading to LLC for a little more security. For those that have done the same, what's the major differences in any yearly processes or tax deductions or increases that you've noticed?
 

Andy

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Feb 5, 2016
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No Where
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Doesn't Matter
After 16 years, I'm finally upgrading to LLC for a little more security. For those that have done the same, what's the major differences in any yearly processes or tax deductions or increases that you've noticed?
Go talk to your accountant. Everyone on this board are carpet cleaners, which means there advice just sucks.
 

BIG WOOD

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Georgia
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Matt w.
Go talk to your accountant. Everyone on this board are carpet cleaners, which means there advice just sucks.
Both my CPA and my attorney has helped me get this set up. I’m just wondering what you guy’s thoughts are on the matter
 

revitalize

Member
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May 20, 2016
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wisconsin
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adrian
The answer to your question is your income isn't treated any differently as an LLC as a Sole Proprietor. The only difference is that you now have a liability shield from your personal assets. If you were to be sued or filed bankruptcy, they would sue your business and the assets in your personal business to recoup monies and have a nearly impossible time getting at your assets outside of your business. However, if you sign personal guarantees for lines of credit, you will still owe the money.
 

Mark Saiger

Mr Happy!
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Dec 26, 2006
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Grand Rapids, MN
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Mark Saiger
We are an LLC operating as an S Corp

You can possibly now be able to set up a simple IRA for you and others in your company to save some tax money.

There will be other options available to you on tax savings.

You can take distribution payments at times.

Also consider looking at reducing your pay you take and look into taking a rent payment for your business.

There will be other options a good tax and accounting firm can help you with for tax savings.

We switched accounting firms this past year that are very good. They have helped to guide us in many ways and helped us strategically planned our year.... Saving us thousands and also helping to plan many things with our business including how our kids are taking over our business.

We are also expanding another shop as we are doing a major remodel of a shop at our kids place. This shop will be 3 cement blocks high now also...

Future planning and tax planning also for our kids (Aron and Jena)

A good tax accounting firm is very helpful we are finding. That's how the rich keep their money we find...

20190715_183237.jpg20190715_183252.jpg20190715_183405.jpg20190715_183203.jpg
 

revitalize

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Location
wisconsin
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adrian
In simple terms there are really only 5 business types and you can only be one. Sole Proprietor, Partnership, LLC, S-Corp, C-Corp. LLC's are designed for small businesses with moderate net income, with some tax benefits such as if you are a single member LLC, you can expense (if the business pays) your health insurance premium, deductible, co-pay etc. If you post a large net income, it would be wise to look into converting to an S-Corp. S-Corp's are limited to the number of share owners, I think the max is 100, all profit has to be disbursed to the members every year. What this means from a financial standpoint, you have to pay yourself a salary that is commencerate with industry average, and the amount of money left at the end of the year gets passed through as profit not subject to self employment tax so you should get to keep more of your money and the government gets less. There are more hoops to jump through as a S-Corp but if you have a high net income, well worth the expense. C-Corps are designed mainly for public companies or companies that want to go public, where there is a need to raise significant amounts of capital from a large number of sources.
 

revitalize

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wisconsin
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adrian
From my experience Adrian is right. No Tax difference.
In CA we have to pay $800.00 yearly LLC fee.
And if you want to be protected I think you will also need to register your vehicle in the company's name.
Having lived in California twice, another reason not you. Mine is $25 per year and I think it was like $100 initially.
 

revitalize

Member
Joined
May 20, 2016
Messages
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Location
wisconsin
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adrian
My family is crawling with attorneys
They told me in the very beginning to incorporate
After I did, they told me how easy it is to “pierce the corporate veil”
Correct, the problem is most small new companies, especially of the one person variety can not afford the compliance burden.
 

Ron K

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Joined
Jan 3, 2009
Messages
2,371
LLC really don't limit your "liability" that's what insurance is for.
Incorporating does.
Corporations are their own entity.
Malicious acts aren't covered by either, accidents are usually covered
by insurance.
I think.:icon_rolleyes:
 
Joined
Feb 23, 2017
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California
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Matt Ross
I recently looked into it because a contracting company said they required it. For what I do, I dont see much benefit, just more cost and another hoop to jump through. If you have good insurance, it seems like admitting you do shady things and dont want to be responsible for you work. I'm not saying that's always the case, but I hate how people dont own up to their mistakes. They want an excuse or way out when they screw people over. So I didnt do it.
 

ruff

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Apr 19, 2007
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San Francisco, CA
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Ofer Kolton
Matt, I think most business owners want it not enable shady business practices but to provide then a certain protection. In other words, so that they do not lose their life's savings due to a mistake or some far fetched lawsuit. We are after all in the USA, which is the Universe's galactic capital of lawsuits.

Just like the legalese (liability disclaimers) they sign on our invoices. Whether being an LLC or having the client sign our disclaimer form actually provides the protection or not, I've heard contradicting opinions from different lawyers.
My understanding is that it does offer some, especially if there was no gross negligence or a criminal act. Insurance and being an LLC are imho both beneficial.

If for nothing else, be it for the delusional sense of security that allows us to sleep well at night :winky:
 
Last edited:

Cleanworks

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Ron Marriott
Incorporating offers some protection from liability but directors of said corporations can still be sued individually in some cases.
 

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