Sole proprietorship vs Corporation or LLC
I'm having trouble choosing between the three. I called my accountant and she told me to choose Corporation. For some reason I don't think that's a good idea. I know she's the professional, but stuck between Sole proprietorship and Corporation. I would love to know the choice you all made, and was it the right decision.
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Replies to This Discussion
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Permalink Reply by Audrey on
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you don't really have to do anything to be a sole proprietor. A corp has quite a bit of paperwork to keep. An LLC is cheaper and very little paperwork.
You can be a LLC and file a form with the IRS to be treated like an S corp for tax purposes. This is the most economical way to go. Does your accountant specialize in small businesses? A good CPA should be able to explain the pros and cons of each choice.
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Permalink Reply by Brittnee on
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She's like a family accountant. My stepmom own two daycares, and she's LLC. So I went through her since she's been with my stepmom for ten yrs. I was thinking more SP, but I herd it's more liability. So say for example if something happen ( praying nothing ever will), but a client or individual can sue your business, and personal asset if you went the SP route. I would like to do LLC, but I've herd it's hard to go that rought. I do know corp is most expensive, so I was wondering why would she tell me to go that route.
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And when you say paperwork you mean receipts and documentations? Are in the applying process?
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Permalink Reply by Claire Barnes on
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What state are you in Brittnee? if you are in California DO NOT get a corp or LLC. They charge you every year $800 regardless of whether you make money or not. Believe me we know! Our company are tired of doing business in California for this reason as well as many others (tax related) Corp generally mean "if somebody was to sue you for whatever reason....that they cannot go after your personal assets (ie home, savings etc) they can only go after your business assets".
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That's what I was thinking. I would hope nothing bad really happen, but ther'es always the what if. I'm in GA, and looking to also receive my dual license in FL. I've been considering on getting everything in FL since legally I'm still a resident there.
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Personally i would go with sole prop if you work alone with good liability insurance.
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So just to confirm if I choose SP, and have great liability insurance that would cover any legal issues if they ever were to occur?
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i 'think' so. I am not an expert in the field so i would not say with 100% certainty. If you go onto www.legalzoom.com they are a great company that have so much info on this kind of stuff AND you can call them for free advice. They are very helpful.
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It depends how much money you make as well as some liabillilty factors. My accountant ran numbers for me & we projected out when it would be a good time to switch to a corporation. At this point though, with all the laws changing & the additional charges as mentioned, it still may make more sense to go this way depending upon laws around that & number of employees etc. :)
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I went with Corporation and filed to become an S-Corp, which is essentially the closest thing you can get to a sole proprietorship as a corporation (all the profits/losses go through me at the end of the year). The reason for this is that my husband and I have assets and regardless of how good my liability insurance is, if something goes wrong with the business (either someone gets hurt or my landlord sues me), they can only go after the assets of the corporation and not our personal assets. If you are just starting out and don't own a home or have a ton in savings, it might not be worth filing as a corporation (certainly the paperwork is hefty). But if you do own your home or have a retirement account etc, I would have the accountant look into the real differences in taxation for you.
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