Hi there…sorry if I posted in wrong thread…I’m new here:) My accountant suggested I become a llc, still run as as sole prop. because of liability…any thoughts/ suggestions? Thanks so much…This site is great, theres so much to read…
LLC’s provide some protection of your personal assets in the event you’re sued. There are other concerns as well. I’m still a sole prop but I know a few guys here are LLC’s and they can enlighten you on any tax issues.
I regret moving to an LLC. Here’s the reasons.
- If you pay yourself a paycheck. you will be paying income tax on yourself and your company. NO THANKS.
- LLC’s can be treated as an SP in certain situations. IE if you are the only person who works and owns the company and you screw up, then a smart lawer can still get ya.
Here’s what I found out about that through my accountant last year. The LLC will only protect you if you have others (management) who have the autority to do things in the company name. IE lets say you have a manager with a credit card and they decide to fraud the card. Your company is protected and you are protected. I’m sure you will go to court but getting hold of your house will be hard. If you are the only one working in the company and you fraud the credit card, then the LLC will not protect you.
Think long an hard before you roll with this change. Point being is your insurance will protect you either way if your ladder falls on something. You will still have to pay sales tax if your state requires it. Mine is every 1/2 regardless of LLC or SP. So in my view I don’t see me making my company an LLC a benefit, even more so now that my state is raising taxes on small business. Once again, think long and hard before you make this step and talk to a professional…
LLC’s were impliemented in the USA to fill a gap. Some businesses are really too small to INC yet too big to stay a SP. So they made the LLC to fill the gap. But I’m sure in the beginning there were people who took advantage of loop holes. IE starting an LLC, running up bills then going out of business. I’m sure the loopholes have been plugged.
Thanks for the info…I have an appt w/my atty. and I will make sure I understand all the ins and outs before switching…I was told that I could still be sp, not have to issue myself a ck…and I know liab insurance would cover a ladder falling damaging property but how about if an employee falls and gets hurt or worse, is killed…can the family come after my assets? 1 employee is my hubby but other is another man…any thoughts…thanks so much for your help
FedEx dropped off my LLC packet yesterday, so I’m a member of the club for better or worse.
The biggest reason I did was to protect assets, but like Juggernaut said, a lawyer could come after you IF you didn’t keep finances well seperated. So more than likely you would want to write yourself a check and don’t pay for the family vacation out of the company account (unless you name the husband your vice president, then it’s an annual meeting AIG style;))
It’s alot like the employees versus no employee debate, are you content where you are at, or do you want to expand in the future, if you do then CYA!
I thought the whole point in forming an LLC was to avoid double taxation.
As a corporation,(with officers) you protect your assets but have to pay taxes on the check that you write yourself.
SO… you pay taxes on the company gross, then you pay personal income tax on the little check you wrote yourself.
What are the forseen drawbacks. Other than the Secretary of States office charges double for you to form an LLC?
[I](at least in my area.)[/I]
My understanding of a LLC is that you pay taxes, after business expenses are taken out, so essentially you could spend half the money the LLC made and would then only be paying taxes on the half not spent.
You then pay yourself minimum wage and pay personal income taxes on that. So for example you need a new car, well you buy it as a company car. The company owns the car but you get to drive it and after all you own the company so it does not matter that the company owns it. Then apply this principle to every thing you can so that the company owns everything but you get to use it. And it is considered a company expense so it is taken out of the profit before the taxes.
I dont know if I am right, thats just what I have been told.
