Should I incorporate, LLC, what?

[skiflyer]

I work full time... and have always done odd jobs for the occasional friend or family member.

Now it's to the point where the odd jobs are paying reasonable cash, and incurring reasonable costs.

Additionally, I'm working on a project which may itself turn into a full time company of its own one day.

Is it time for me to become a business entity? I'm thinking it's silly that hardware and software costs are coming out of my pocket when I should probably be getting some sort of tax write off for these... any suggestions on the easiest, most affordable, and worthwhile way to approach this?

In Illinois, USA if that matters at all. Imagine I'll be going to an accountant about it soon, but want to at least be somewhat knowledgeable before I do.

 

[sleipnir214]

I recommend that you set up your business as a separate economic entity. My primary reason is that by keeping the business and your personal finances separate, you provide protection of your personal finances in the worst-case scenario, such as a lawsuit. As a secondary reason, there are economic activites that are easy to expense in a business and hard to expense personally.

You really need to talk with a professional in your area to see what your options are.


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[wdoellefeld]

LLC in my opinion. All the benefit without all the work.

FRCP

http://www.frcp.net

 

[Rich13]

You want to be knowledgable before speaking to your accountant? Check this out.

http://www.expertlaw.com/library/pubarticles/Business_Law/business_form.html

I echo the comment that you should consult with a professional about whether and what form of business to choose.

Rich
rckatz_usa@comcast.net

 

[cookie101]

It may be too late. The government might think poorly on your choice to have accepted funds for your work originally, and now, only that you've earned too much money, are you considering incorporating.

The issue is that you may be able to claim these charges on your income, and may have to if you earned over a certain amount (I think it's something like $5000 or so, but I'm not sure).

Problem: If they find out, you may owe back taxes, but I'd talk go to H&R Block tax consultant and find out what to do. They're a dime a dozen during the tax season and may even offer free advice to keep your recurring business.

Solution: I agree with the others, talk to a professional. You may even want to talk with a lawyer who sets up businesses for a living.

I have a friend who is set up as a Sole proprietor through a DBA name. $15.00 and a visit to the county courthouse will get you a name. He's going to change later when he has the time and money to file the paperwork.

If you start out as a sole proprietor, you can change later to LLC, or otherwise (LLC is really a good deal for small busniesses) with a little paperwork. IRS tax rules change for an LLC versus sole proprietor. Plus, if someone sues the company, as a sole proprietor, you run the risk of losing your stuff. If someone sues the company, as a LLC, you lose nothing, and the company can claim bankruptcy. You're protected behind the LLC.

KEEP BUSINESS AND PERSONAL FINANCES SEPERATE! Pay yourself a wage. If you want, you can pay yourself all of the income of the business, but you MUST document it. Buy a small business accounting package like Quickbooks to help.

Some small thoughts on a big decision. Hope this helps.

Garrett
CCNA

"The only knowledge you need is that which you do not have. Keeping what you have is the hard part.

 

[GlenJohnson]

Sole P, without a doubt. Make sure you have a seperate checking account for the business, and keep personal and business seperate. Good luck.

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Glen A. Johnson
"An investment in knowledge always pays the best interest."
Benjamin Franklin

 

[bisawest]

Several years ago I did some research on this issue. You want something that allows seperate finances, probably the LLC. Incorporation is more paperwork, but is probably worth it, if you want health insurance, and want all the advantages (tax and otherwise) Make sure, though, that you document everything, including your salary, benefits, etc... You should probably draw up a business plan, and guidelines that state what your business is about, how decisions will be made, organizational structure, other employees (wife, etc...), who is responsible for what, etc...Remember, in the business world, documentation is key. I hope this helps. Have a nice day!!!

 

[johnwm]

In most jurisdictions trading as a sole trader without the protection of limited liability means that if the operation runs into financial difficulty (from bad debts, difficult customers or court cases for instance) then all your personal assets (probably including your house) are on the line.

Unless you have no assets to protect, consider incorporation, but whatever you do, get professional advice BEFORE proceeding

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