should i become incorporated?

[homer15]

i own a small business. recently, a family friend who also owns a small business was sued (i don't know why). it hurt him bad, but not so bad that he's poverty ridden. this got me thinking, if somebody sues my business, then they're suing me, and that can be a bad thing. so, should i become incorporated?

[LawyerRon]

You're probably much better off "tax-wise" if you go with an LLC. Same protection from personal liability, but no corporate taxes.

[homer15]

thanks lawyerron, how do i go about doing that?

[mbossman2]

Originally posted by homer15 thanks lawyerron, how do i go about doing that?

hire ron? just a thought....

[Confused]

Particular circumstances can affect what is best method. In my case after consulting tax advisor and accountant it was better for me to go the corporate route.

And yes, you need some kind of protection for your personal assests as your friend found out
Chas

[Panama Red]

Check out liabiltiy insurance too. And if you are ever in possession of customer property, ie: for repair, make sure you're insured against loss or damage. Same with your auto insurance. Make sure the coverage includes customer property and your test equipment.

[SonicVanguard]

Originally posted by homer15 thanks lawyerron, how do i go about doing that?

Our studio is an LLC - the best thing I could tell you is to hire a lawyer you know and trust to take care of it. I'm sure LawyerRon will agree that a good attorney is worth their weight. But I will say this, you don't want to set this up yourself. Too many hassles and too many I's to dot and T's to cross that a lawyer won't miss but you might.

Dave.

[homer15]

how much does this process normally cost? any ballpark will do.
my company does not generate much revenue yet.

[edfair]

Actually you need a team. Lawyer for the filing, an accountant for the tax ramifications of the different choices, and an insurance agent to handle those items in a pension plan.
I was servicing 3 CPAs in 1976 and all 3 suggested the accountant since CPAs are limited to following strict IRS guidelines and accountants can more creatively configure your taxes.
I assume you would like to save money in a tax advantaged way. That is the reason for the insurance man.
My corp started on September 14th 1976. That was the optimal tax date. And you transfer your tools to the corp for tax free payment when money becoes available.
You could also do some wheels stuff, and household office stuff by my acct. kept me from those grey areas.

[Confused]

Originally posted by homer15 how much does this process normally cost? any ballpark will do. my company does not generate much revenue yet.

States have their own regulations. I live in KY and used a accountant to set everything up and my total cost was about $400.00 for corporation name and filing.

The corporation protects your personal assests. Insurance is mainly to protect your clients in case you do damage. My primary client requires me to carry a 1 million libility insurance policy which is my major reoccuring expense. Being semi retired I don't advertise and only have about 12 clients. Only one other requires insurance.

If you are building and repairing PC's for the home you probably would not need a large policy. Business customers might require one though.
Chas

[Jaggannath]

And if it becomes too much trouble, Homer, just follow the advice in your sig

[homer15]

i'll only move bodies if there's some kind of tax benefit.

thanks a lot, guys.

[Confused]

Originally posted by homer15 i'll only move bodies if there's some kind of tax benefit. thanks a lot, guys.

There are a lot of tax benifits. Deduct at 37.5 cents per mile for work (to and from). You got to have a computer for record keeping and billing. A printer to print the bills. Scanner/copier are also needed. Postage for billing can be deducted plus supplies such as paper/envlopes ect. Internet access for research order parts/equipment. Business meals. You get the picture.
Chas

[LawyerRon]

I would charge you about $1,000.00 for about 2 hours of work to set up the LLC. It is possible to do it yourself if you’re motivated to learn; go to your local bookstore and in the “legal self-help section” look for the book from Nolo Press on setting up your own LLC. It explains all the tax benefits, etc, and compares the LLC to a Corp, Sole Proprietorship, and Partnership for your information. Go to the Calif. Department of Corporations website and you can download all the necessary forms, and see the filing fees etc. Also, find out from your tax adviser as to when your first tax return would be due. You must file a return within so many months after setting up the LLC.

You can also see Nolo’s books here: www.nolopress.com

[glc]

Wow. I think I'll raise my hourly rates I charge law firms for IT services..........

[SonicVanguard]

Originally posted by glc Wow. I think I'll raise my hourly rates I charge law firms for IT services..........

No kidding...we just did a full A/V spread for a local firm to promote their 25th anniversary...I think I need to revisit that invoice.

Dave.

[LawyerRon]

glc and Sonic: it won't work; the only group cheaper than Lawyers is Doctors.

[Mac Medic]

My wife and I have a production company LLC.

She filed the paper work with the sec state herself, cost $25.

Absolutely no need for lawyers or accountants for this process.

[LawyerRon]

She filed the paper work with the sec state herself, cost $25.

Absolutely no need for lawyers or accountants for this process."

OEM, in many cases that's true, if the person is motivated to do it correctly and the LLC is not complicated. BTW, the filing fee in Calif is $70.

[SonicVanguard]

Filing in Michigan is not that easy. Too many consumer protection laws around here. Filing was only $60 (if I recall correctly), but we wanted it done right, so we made sure our lawyer and CPA was involved.

Dave.

[LawyerRon]

..but getting back to Homer's original post; you probably don't want to be a corportation, unless you're making tons of money in some sort of business that can benefit from the IRS corporate taxation laws. Otherwise, you're gonna face double taxation; you'll pay corporate taxes, and taxes on your personal earnings too.

[Confused]

When I said we decided corporation was best route for me to go, I should have clarified that I am talking about a S corporation. Gives protection of corporation and allows money to pass thru to individual/s. So far there hasn't been any corporate taxes.

If you decide to do it yourself (whether corporate, LLC, sole proprietorship, ect.), be sure to research and register your name not only on local and state level but on the national level also. That is one of the reasons I turned it over to someone experienced in the process.
Chas

[homer15]

well, my cheapness would motivate me to get it done right the first time... but i'll probably end up having a lawyer and cpa looking into it. thanks a lot guys.