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We are discussing what we should/might do since our two sons are joining us full time in the business. Right now we are a Sole proprietorship but should we look into being a Partnership, a Corporation, Limited Liabilty Corporation, ??? I have been reading up on the different types of business organizations and what are the plusses and minuses...What do you guys think? What's worked (or been a problem) for you? And the other question, should I make an appointment & go get advice from my lawyer or my accountant? This is a tough decision and I don't want to make an UNINFORMED one!
-------------------- Jane Diaz Diaz Sign Art 628 W. Lincoln Ave. Pontiac, Il. 61764 815-844-7024 www.diazsignart.com Posts: 4102 | From: Pontiac, IL USA | Registered: Feb 1999
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Each structure has it's advantages and disadvantages. You really should speak to your accountant, as you suggested.
-------------------- Jon Aston MARKETING PARTNERS "Strategy, Marketing and Business Development" Tel 705-719-9209 Posts: 1724 | From: Barrie, ON, CANADA | Registered: Sep 2000
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I would talk to your lawyer before making any type of decision like that. We went LLC just for simple protection more to protect the business from us then vice versa. I didn't want the business to die with me so there would be something for my kids when I move on. Also makes it a little more appealing to the bank when we want to borrow money or if we ever decide to sell. Taxes are a little more complicated but that's what an accountant is for.
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Hiya Jane, Talking to an attorney would be the best place to start when it comes to business structure and liability. You're accountant will give you the financial advice on what would be best too. Between the two, you may find conflicting information, but you should be able to make an informed decision Do you wish to pass the business to your sons when you retire? If so, an LLC or an "S" corp would probably be your better approach. They're relatively easy and inexpensive to set up. LLC's and LLP's are popular right now, but these type of businesses haven't been tested in a court of law yet. The other forms of business have. A sole proprietorship wouldn't work because it's really meant for 1 owner and the line between your personal and business assets are blurred. So, if something goes wrong in the business, you can be held personally responsible and loose everything. With partnerships the same rules apply as a sole proprietor, but, can be a bigger headache. Mainly because, to do it right, there's a whole lot of paperwork/contracts are required that would address every situation and every partner. And, whatever you do, be sure to stay away from a "C" corp. You're taxed twice on your income, once on the business level and again on a personal level. So, if you register as a corporation, you have to make your "S" selection once the corporation is registered.
Congratulations on making the next step and good luck!
-------------------- a.k.a. Brian Born www.CheckersCustom.com Harrisburg, Pa Work Smart, Play Hard Posts: 3775 | From: Harrisburg, Pa. U.S.A. | Registered: Nov 1998
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In Florida, to do installs we had to go Inc. or LLC and pay for workers comp. or file for exemption. It's just my hubby and I but our accountant said to go the Inc. route based on our finances I guess.
I always wondered if he was full of crap because the tax stuff is a pain in the butt. I decided to find another accountant because I never saw eye to eye with the other (come to find out he died!). Anyway, back on track....the new accountant said we made the right choice and if we had been an LLC rather than Inc. the previous year we would have had to pay almost $1000 more in taxes or something.
You definately need a good accountant. Having to do a payroll for myself is really interesting since sometimes I have no work!!! I let her worry about all of that stuff.
-------------------- Amy Brown Life Skills 101 Private Address Posts: 3502 | From: Lake Helen, FL, USA | Registered: Feb 2001
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We are an S-Corp. A little more personal liability protection as well as some other advantages. But there are disadvantages as well. When we filed LLC wasnt available in NJ at the time.
"Some are born to move the world, to live their fantasies. But most of us just dream about the things we'd like to be." - Rush Posts: 1192 | From: Washington, NJ | Registered: Feb 1999
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-------------------- a.k.a. Brian Born www.CheckersCustom.com Harrisburg, Pa Work Smart, Play Hard Posts: 3775 | From: Harrisburg, Pa. U.S.A. | Registered: Nov 1998
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Another advantage of an S Corp. is that if you own your shop building personally, you can rent it from yourself. The advantage is that rental income is not subjected to SS tax, that will save you around 15-17% in taxes a year. My rent is fair market value, but it is high. If you rent you building to yourself for $2000 a month (it must be resonable), you will save almost $4000 a year in taxes compared to taking the income as wages.
-------------------- Carper's Signs 594 Union School Rd. Mount Joy, PA 17552 carpersign@earthlink.net Posts: 157 | From: Lancaster, PA, USA | Registered: Aug 1999
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In Colorado, an LLC has the same advantages as an S Corp and no Corp income tax on LLC. I agree your attorney is the best advisor although many general praticioners are not well versed in Corp Law. This is no spall step, especially with the next generation involved and inheritance issues to consider. Be certain the attorney understands your long term goals, personal, family and business.
-------------------- Kent Smith Smith Sign Studio P.O.Box 2385, Estes Park, CO 80517-2385 kent@smithsignstudio.com Posts: 1025 | From: Estes Park, CO | Registered: Nov 1998
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Just don't get wrapped up in the "protection" aspect.
People think when they incorporate their businesses that their personal assets are then protected from someone coming after them, and it's simply not true. If something happens and your corp gets investigated, and they find that the corp really is just you or you and hubby, they can still sieze your personal assets for settlement.
Aside from that there are tax benefits, like no self-employment tax and like Ron mentioned, you can have the corp rent, lease or purchase personal property for use in the business.
It also forces you to keep business and personal income separate which is never a bad thing.
-------------------- "If I share all my wisdom I won't have any left for myself."
Mike Pipes stickerpimp.com Lake Havasu, AZ mike@stickerpimp.com Posts: 8746 | From: Lake Havasu, AZ USA | Registered: Jun 2000
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Mike's right. The protection you think you have may not really be there. Personal liability umbrella insurance is inexpensive and is a good choice to protect folks like me that are better off being a sole proprietor.
-------------------- Brian Snyder Sign Effectz Woodbridge, New Jersey Posts: 723 | From: Woodbridge, NJ USA | Registered: Nov 1998
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