Starting business, LLC? Sole Proprietorship?

I was pondering this very question myself as I saw the headline for this thread!
Seems like the Sole Proprietorship would be easiest,but I think the LLC. provides more financial protection in the case of a lawsuit against.

Yes,any input would be helpful-Vernon

First off, Get a business name.

If your business starts to do well get a LLC.

That is what I suggest.

When you incorporate your personal assets will not be up for grabs if you are sued, only your business assets. From what I remember Delaware is very popular for incorporating, I don't know if they have lower corporation taxes but I do know you do not have to be a resident there to incorporate.

S-Corp in most situations. LLC's don't cost a couple grand, you can incorporate for only a few hundred. You will still need a business license in your city, so that would be a nice first step. Never stay as a sole prop unless you aren't successful. If you want to options of establishing business credit, and having a corporate veil then incorporate.

Don't take the advice of anyone on this forum or "the lady at the bank".

It all depends on what your short and long term expectations and plans are.

The type of business entity can affect not only how much you pay in taxes, but how you pay it and your legal liability.

Plus, there are some entities that once you make the adoption, cannot be changed easily.

This is one of those times when it is best to get the advice of an attorney who specializes in small business structuring. Yes, just about every business attorney will tell you they can do this but I assure you, you want to find someone who this is their specialty.

Total cost for my LLC in Florida was something like $165 and it was done same day online, can't beat that.

In one day had LLC, EIN, bank account, and phone numbers. I do agree however you may want to be sure you have something that will actually generate some income before you spend a dime forming a proper business outside of DBA. However, LLC's certainly are not thousands of dollars.

Start off at sp first , it will be more easier to manage

Like TOPKAT22 said, it depends on your business. That said LLC is better for liability but I know quite a few successful business owners (1+ Million Year) who go the sole-prop direction even in the service sector so it depends on what you do.

Many different types of businesses have different levels of liability and most insurance companies can cover these types of losses so personal liability isn't always the issue.

If you are going into business, sites like "legal zoom" aren't going to cover it. Don't get me wrong they are great for the paperwork and license fees but until you talk to a lawyer you won't know which ones to go for and or why.

If you haven't made enough money doing what you do now to afford to have a lawyer on retainer, there are some websites where you can post questions, have conversations, and seek the advice of an attorney for a small fee of 25-50 bucks.

However you would do well to remember that "general advice" isn't going to cover YOUR specific needs regarding YOUR specific situation.

What type of business are you going to start if you don't mind my asking...

I'm not sure how your state is set up, but here in PA (as HYPETEXT mentioned above) we have a Small Business Association and they are more than willing and often more than happy to provide you with advice, information regarding loans, legal compliance, grant application submission, and a bunch of other resources that are available and vary from state to state.

They want more local business and are more than qualified to help you decide where to set up shop, what the competition is like, the specific needs of the community you are planning to do business in and making sure you are compliant with state and local laws, which can be a b*&%#.

Especially if you are used to doing things one way in one state which aren't necessarily legal in the state you are getting ready to business in.

At any rate they are worth checking into because you never know what they can do to help you until you check them out...

Have any questions, just PM me and I'd be more than happy to help out in any way I can...

Good luck in your endeavor and remember when in doubt call your attorney :-D

First of all, IRS doesn't recognize LLC for federal tax purposes. They are a "state" type of business structures and their main role is to offer limited personal liabilities for business owners.

For tax purposes, if you are a single member (single owner), your LLC will be treated as a sole proprietor. If you want corporate treatment (S-Corp), you need to file a form with the IRS. That's all that is to it.

Hope it helps,


Thomas

I use DBA's until the enterprise has made enough money to justify the cost of an LLC--which is only $56 to file here in Utah, and I get the management agreements from templates online since it's usually just me and they're pretty much the same.

Haha alright thanks guys, I feel the best advice that can be taken from all of you guys at least from here is to get a name and license, then get a DBA, then worry about opening a sole proprietorship or LLC, and that should be only once I start making good money. I'll definitely give the SBA a free call, I didn't about that kind of free consultation. Thanks guys keep your flow coming!

Last time I checked, Cali has an $800 a year "franchise" fee for any formal entity. Call the Cali Secretary of State and ask them how much the annual fee is.

Setting up a formal entity does not guarantee that your personal assets are protected. I had a Nevada corporation and was sued. The caselaw presented was a "reverse corporate veil" type and the Judge did not rule in my favor. I fought it. I had proof that my corporation was indeed a corporation - not acting as an individual and IT DID NOT MATTER. So don't believe that your personal assets are not at risk because they are.

In internet marketing, if you are doing businesses in states other than the state where you reside, you can form an entity in Nevada, Delaware or Wyoming - the three top states for forming entities.


An LLC can be treated as a subchapter S type entity. It is not on a state level, but rather a Federal level. An LLC can choose to have any profit or loss flow through to the individual members' tax returns. I can't remember what the tax forms are for the LLC - an 8832 I think, but a corporation files a Form 2553 for a subchapter S election. The election has to be made within 75 days after you form your entity.


You can file the paperwork on your own, but you will need a resident agent. The filing fees in each state are different but are usually posted on the Secretary of State's website.

You will also need to get a business license in the state where you form your entity.

i would go LLC you are better protected.

Its a Corp that can go either Subchapter S or C...NOT a LLC. I am not sure if the above was just a goof or not but figured I would point it out.

A LLC can actually be better Tax wise as there is no double taxation where money made by company and money made by the individual are both subject to income tax, on a LLC you simply pay as an individual.

And Yes...CA charges $800 for either LLC or Corp per yr.


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You should seek for professional help, but I would recommend starting off not with anything.

Make enough sales consistently, and then consider filing for a LLC. Use your website as a portfolio.