LLC or Sole Proprietorship?

Anyone know if you need to be an LLC if you're already covered by the ASCP liability insurance? I'm going to be renting a booth and wondering if the sole proprietorship will suffice? I know the association offers legal advice, I'm just waiting on a callback and anxious to hear what others have done to start their businesses...

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Permalink Reply by Teresa Escoffery on June 19, 2015 at 9:10am

Yes.

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Permalink Reply by Teresa Escoffery on June 19, 2015 at 9:12am

" I can take out 50% of my wages as a shareholder distribution which I don't pay federal and state income tax on"

This is INCORRECT and is a huge tax liability.

A shareholder distribution is just your company's profit being paid out to you, the owner and sole shareholder, instead of having it reinvested as "Retained Earnings" on the balance sheet.

The profit still shows up on your 1120S tax return, which is "passed thru" to your 1040 form as Schedule C income. You still owe state and federal tax on these distributions.

SDs ARE exempt for FICA and FUTA and other payroll taxes, but NOT income taxes. This still saves you between 15% and 20%

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Permalink Reply by Rhonda McDaniel on October 15, 2014 at 8:49am

As a former accountant, an LLC will offer you some protection. Check with your accountant and they can advise you of your best option.