Local SEO Company Registration: LLC or Sole Proprietorship

16 replies
I am planning to start my own local seo company and was wondering if I should register under LLC or Sole Propriertorship?

Looking for some expert advise. Thanks in advance.

Some of my concerns below:

1) What are my liabilities? (what can happen from your experience? Getting sued for deindexing a company site? etc.?)

2) Which type of registration will give me a higher advantage for this business - in terms of TAX returns, write off etc., I plan to work at home - will probably get a mailbox for business - dedicated phone line - travelling expense etc.
#company #llc #local #proprietorship #registration #seo #sole
  • Profile picture of the author swilliams09
    This should help. Let me google that for you

    Seriously though, you can start an sole proprietorship until you get you feet under you and switch to an LLC at a later date. I would do my research online and check into the local laws governing LLCs.
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  • Profile picture of the author Noobcorp
    Thanks.

    With respect, I know the difference between them but I am just looking for some inputs and experience from others - if anyone got sued doing this or that etc. - especially we are talking about intellectual property here. You get the idea.

    Thanks again@
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    • Profile picture of the author ISavant
      I can finally help with something, I am stoked.

      You know the difference between an LLC and a Sole proprietorship so you know that you can be sued and have everything taken from you if you go the sole proprietorship, but you will be protected with the LLC.

      With the precedent set in courtrooms now an LLC could end up just as liable as a Sole proprietorship. "Breaching the corporate veil" as it is known in the business, it is where someone sues the company for negligence but argues that it was your lack of due diligence and thus you are responsible... So, not much protection there.

      The way it used to work was for example: You own 5 pizza shops, you would incorporate all of them under their own names, "pizza shop 1" "pizza shop 2" but they would all be called pizza hut or whatever the name is. The reason you would do this is to protect yourself, because you know if you had an LLC and one of your drivers hits someone and sues then you are only liable for 1 pizza shop.

      The courts caught onto this and "breaching the corporate veil" has been happening ever since.

      Now to really throw a curve ball into this mix. A Sole proprietorship can actually have clients sign contracts that waive their ability to sue. While it is not 100% affective, you will have a very strong defense- "The client sat down with me read the papers and agreed" So, your contracts will end up protecting you, and you would be surprised at how easy some of the contracts are, you don't need huge elaborate spills going into every plausible "what if" because courts already have that set up for you. The only thing you would need to be ready for is if: you cannot deliver what you say you are going to deliver.

      So, you would want to make clauses about what could go wrong as to why you may not be able to deliver, but again "Hurricane Katrina wiped out my office" the courts consider stuff like that to be "an act of G-d" so that doesn't need to go into the contracts.

      I hope that was helpful, but a quick summary: LLC just as liable as Sole proprietorship, but they can both be protected by contracts. So, if you know a guy that can write you the contracts for cheap then a Sole proprietorship would be the way to go ( or if you wanted to write the contracts) The thing with an LLC now is that it is a title you are incorporated and that normally builds a certain level of trust right off the bat.
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  • Profile picture of the author iAmNameLess
    To be honest, I don't see any advantage of being a sole prop. People always recommend it on here, but the truth is, you can lose your shirt, home, business, everything you have if you aren't smart about your business.

    If you handle SEO for an established company, who has ranking but want to expand, yes you can definitely be sued and you will go under very easily if you are a sole prop. Handling bigger accounts like that, you either need to pay a LOT for a great lawyer and have very tight contracts.. or you should just incorporate.

    Sole Prop - personal liability. Your business is personally tied to you.
    S-Corp or any other incorporation, limited liability.. it is its' own entity. You can establish separate business credit. Most protection.

    If you take yourself, and your business seriously, and have big visions then you need to take the necessary steps to protect yourself.
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  • Profile picture of the author AWill
    If you are looking for true insulation from liability, a corporation (S-Corp) is the only option. An LLC (corporation "lite") provides some protection but not complete protection. I would not do anything as a sole proprietor, especially b2b work. People are just too litigious these days (though I have not heard of any offline marketers getting sued). Keep your SEO practices white-hat and you should not have to worry about getting a client deindexed.

    Also, always work under contract for both of your protection. If the client won't sign one, walk away. Make sure the contract is professionally written to limit your liability to that of a full refund only.
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  • Profile picture of the author geotargeted
    I go the corp route. And really if someone is going to sue you there is nothing stopping them from naming you personally and the entity, and believe me you WILL be named personally. I would.
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  • Profile picture of the author Noobcorp
    I understand that if I have to choose LLC or Sole, its obvious to go with LLC due to liability concerns.

    However, the startup cost is MUCH higher also.
    That is why I am asking this question and was wondering what can really happen to a SEO company.
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    • Profile picture of the author Mr. Subtle
      Originally Posted by Noobcorp View Post

      I understand that if I have to choose LLC or Sole, its obvious to go with LLC due to liability concerns.

      However, the startup cost is MUCH higher also.
      $125 to form a LLC is too high for you? If so, then you probably don't need to go that route since you don't have any assets to protect.

      Also, don't worry about your corporate veil being pierced... as long as you're following a few simple rules (like keeping personal and LLC funds separate) you'll be fine.

      Going the LLC route is extremely popular and it's not just for one man shops. Amazon and Chrysler... among many other large companies are LLCs.

      LLC is the best insurance you can buy for $125.
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      • Profile picture of the author Noobcorp
        Originally Posted by Mr. Subtle View Post

        $125 to form a LLC is too high for you? If so, then you probably don't need to go that route since you don't have any assets to protect.

        Also, don't worry about your corporate veil being pierced... as long as you're following a few simple rules (like keeping personal and LLC funds separate) you'll be fine.

        Going the LLC route is extremely popular and it's not just for one man shops. Amazon and Chrysler... among many other large companies are LLCs.

        LLC is the best insurance you can buy for $125.
        Oh Thanks!
        I didnt know LLC only cost $125. I guess it depends on which State you located? I went to my local accountant the other day and was quoted $1000+ (serious). He said he will do some extra documentation etc. (i have no idea what he was talking about as I was just asking for some brief info at that moment).
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        • Profile picture of the author IngeniousBastard
          Originally Posted by Noobcorp View Post

          Oh Thanks!
          I didnt know LLC only cost $125. I guess it depends on which State you located? I went to my local accountant the other day and was quoted $1000+ (serious). He said he will do some extra documentation etc. (i have no idea what he was talking about as I was just asking for some brief info at that moment).
          Ouch. Your accountant is not afraid to bend you over a burning trashcan. I am starting my second LLC; this time in Oregon (first one was in CA) and it's only $100 plus $5 (if you want the confirmation copy). If you go to How to Start an LLC and click on your state, it'll walk you through it. Hope this helps.
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  • Profile picture of the author Noobcorp
    Thanks guy.

    Only if I knew LLC only cost $100 - $125
    I wouldnt even be asking this stupid question. Its no brainer to get LLC then, just to cover my ass if anything.
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    • Profile picture of the author iAmNameLess
      Originally Posted by Noobcorp View Post

      Oh Thanks!
      I didnt know LLC only cost $125. I guess it depends on which State you located? I went to my local accountant the other day and was quoted $1000+ (serious). He said he will do some extra documentation etc. (i have no idea what he was talking about as I was just asking for some brief info at that moment).
      Originally Posted by Noobcorp View Post

      Thanks guy.

      Only if I knew LLC only cost $100 - $125
      I wouldnt even be asking this stupid question. Its no brainer to get LLC then, just to cover my ass if anything.
      It depends on your state, and filing an LLC is not the same as an S corp or C corp. I would recommend talking to a lawyer or accountant you trust. In Illinois the filing for an llc by yourself is $500, whereas an s-corp is about 175. Different states have different fees.

      Originally Posted by ISavant View Post

      I can finally help with something, I am stoked.

      You know the difference between an LLC and a Sole proprietorship so you know that you can be sued and have everything taken from you if you go the sole proprietorship, but you will be protected with the LLC.

      With the precedent set in courtrooms now an LLC could end up just as liable as a Sole proprietorship. "Breaching the corporate veil" as it is known in the business, it is where someone sues the company for negligence but argues that it was your lack of due diligence and thus you are responsible... So, not much protection there.

      The way it used to work was for example: You own 5 pizza shops, you would incorporate all of them under their own names, "pizza shop 1" "pizza shop 2" but they would all be called pizza hut or whatever the name is. The reason you would do this is to protect yourself, because you know if you had an LLC and one of your drivers hits someone and sues then you are only liable for 1 pizza shop.

      The courts caught onto this and "breaching the corporate veil" has been happening ever since.

      Now to really throw a curve ball into this mix. A Sole proprietorship can actually have clients sign contracts that waive their ability to sue. While it is not 100% affective, you will have a very strong defense- "The client sat down with me read the papers and agreed" So, your contracts will end up protecting you, and you would be surprised at how easy some of the contracts are, you don't need huge elaborate spills going into every plausible "what if" because courts already have that set up for you. The only thing you would need to be ready for is if: you cannot deliver what you say you are going to deliver.

      So, you would want to make clauses about what could go wrong as to why you may not be able to deliver, but again "Hurricane Katrina wiped out my office" the courts consider stuff like that to be "an act of G-d" so that doesn't need to go into the contracts.

      I hope that was helpful, but a quick summary: LLC just as liable as Sole proprietorship, but they can both be protected by contracts. So, if you know a guy that can write you the contracts for cheap then a Sole proprietorship would be the way to go ( or if you wanted to write the contracts) The thing with an LLC now is that it is a title you are incorporated and that normally builds a certain level of trust right off the bat.
      I am not sure where you get this information from but it isn't exactly true. The corporate veil has been pierced a few times but it is usually because of the corporation having issues being in business.
      • If personal funds are intermingled with corporate funds
      • If a corporation fails to have director and shareholder meetings
      • If the corporation has minimal capitalization or minimal insurance
      • If the corporation fails to pay state taxes or otherwise violates state law (like defrauding customers)
      Those are all reasons the corporate veil can be pierced.



      Incorporating your business is a huge advantage compared to sole props... No question about it. You DO have less liability, and you can save on taxes starting out.
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  • Profile picture of the author milla04
    Your situation is similar to mine, I work from home in the UK and building my business within the US. IRS will give you great information on this topic click here, that said i have Incorporated in New Mexico, not only because its cheap to file but the annual fees are "0" cost as i didnt want to pay tax fees, filing fees etc.. For me New Mexico works great.
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  • Profile picture of the author globalpro
    I am in the process of doing this now (am in Florida USA).

    I talked to an attorney (wanted big bucks to do either LLC or S Corp), but in talking to him, it narrowed down to LLC (one man show). He mentioned using an accountant, so I contacted one who is doing LLC for $100, plus filing fees ($125).

    As I grow my business, I will refile as S Corp.

    Right now, the tax benefits for LLC are not as beneficial as S Corp, but S Corp is more expensive to maintain (also more paperwork). Having been a sole proprietor for the last few years, this is the next step and having a business name instead of my name comes off as more professional (at the very least, you could just file a DBA fictitious name).

    Also, as far as cost, I am bartering for services with accountant (she is wanting to develop her web presence for more business).

    Important thing is to contact an attorney and/or accountant to get professional advice on what to do.

    Thanks,

    John
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  • Profile picture of the author Green Moon
    Here is an article on sole proprietorship versus LLC. In states where the filing cost is $50 to $150 dollars, there is really very little advantage to an LLC. In states like Illinois or Massachusetts, where the cost is $500, or California where the annual minimum tax on an LLC is $800, you may question whether there are really potential liabilities that are worth the price of protection.

    Also, LLCs with 2 or more members should always consult an attorney, but filing articles of organization for a single member LLC is pretty simple. In most states, the forms require little more than the name and address of the LLC and the name and address of the LLC's registered agent.

    To get all the filing information, you can either do a search for the state online or go Limited Liability Company Center - Information on LLCs which lists all the states and their fees and provides direct links to the state forms. Most states provide fill-in pdf forms and many now have direct online filing.
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