Business Management question for any contractors
m...@anonamoo.com
i am insured for almost a million and I have only been taking jobs
with people I know since i started my own business about 2 years ago and
left employment of someone else's company
Basically I moved and I never really got into the business side as an
employee.
I do have contracts that state no warranty unless an extended warranty is
paid for and a limitation of liability clause (not more then Labor paid to
date for any reason).
So I am thinking about going LLC because its the next step up
Although I have been reading that in this state they can still come after
personal assets even if its not gross negligence. basically the judge
decides if you are personally liable in the case of a small company. I am
guessing they probably always side against the owner.
After talking to one guy i met that is in about the same situation as me I
figure its going to cost me at least another $1k a year if i can do most of
it myself and as he suggested maybe more like $4K for corp fees and legal
and tax prep, business registration every year.
considering I am a 1 person business and this can all be worth nothing if a
judge finds I am personally liable anyway its ticking me off a bit but
anyway
Do any of you guys do your taxes yourself?
I do my own by hand right now and its not bad.. no turbo tax...
Do you have any tips to lower my costs for accounting and record keeping or
anything???
im more or less running on a shoestring just making it right now and I dont
want to get screwed because someone thinks the cabinet i installed is a
ladder to change a light bulb.
I would rather not LLC even but I guess I probably have to.
marson
My partner and I formed an S corp and I thought it was well worth it.
The initial setup fee was under 500 bucks. I did my own taxes the
first year, but in later years I gave them to an accountant. I had
quickbooks, so I would just bring him a disc and he would go from
there. Was not a big expense, something like 200 or so.
We wound up in a dispute with a homeowner which landed in arbitration.
It was a great comfort being incorporated. a the legal professionals
treated the corporation with respect. I would never run a sole prop.
again. The liability in construction is just too great.
It's true that a judge can "pierce the corporate veil". I think that
happens when people form corps and then pull all sorts of shenanigans
because their assets are protected. If you run your corp on the up and
up (definitely keep seperate bank accounts) I think you are pretty safe.
Matt Barrow
<m...@anonamoo.com> wrote in message news:ekjeu3$c5a$1...@aioe.org...
> Im a sole proprietor right now which is slightly insane
> i am insured for almost a million and I have only been taking jobs
> with people I know since i started my own business about 2 years ago and
> left employment of someone else's company
>
> Basically I moved and I never really got into the business side as an
> employee.
>
> I do have contracts that state no warranty unless an extended warranty is
> paid for and a limitation of liability clause (not more then Labor paid to
> date for any reason).
>
> So I am thinking about going LLC because its the next step up
Going LLC is nearly ALWAYS the way to go. The gist of it being that your
liability is _Limited_, so, short of fraud or some such, your personal
assets are separate and distinct from your business assets, and thus
protected.
Matt
Fran Bragg
> figure its going to cost me at least another $1k a year if i can do most
> of it myself and as he suggested maybe more like $4K for corp fees and
> legal and tax prep, business registration every year.
It only cost me approx $600 to form an LLC in GA using an attorney.
Legalzoom.com has packages that include everything but your state fees for
less than $500. Our corp fee is a whopping $30 per year. (Varies by state)
I would suggest using a CPA for tax prep. You'll need to shop around for
one that understands your business. Costs can vary widely in that dept so I
wouldn't try and compare with someone else's business. There are several
ways to handle the tax side, and tax prep can be either very simple and
similar to what you are already doing as a sole proprietor. Or it can be a
little more complex by electing to be treated as a Sub-S for tax purposes
only. You need to at least talk to an accountant and decide what's best in
your situation. How you file will affect the cost of the tax prep.
Fran
Bob Morrison
> So I am thinking about going LLC because its the next step up
>
> Although I have been reading that in this state they can still come after
> personal assets even if its not gross negligence. basically the judge
> decides if you are personally liable in the case of a small company. I am
> guessing they probably always side against the owner.
>
Most likely there will be no liability protection advantages, but
there may be some tax advantages to going LLC (S Corp). I think you will
need to hire an accountant to make recommendations for your particular
situation.
After that, keeping your own books is pretty easy. If you end up being an
S Corp. then get a copy of TurboTax for S Corp. It makes filing easy and
prompts you for the correct information.
I used to keep the books and file the tax forms for a retail business (a
sideline to my engineering practice) that was an S Corp. Never got
audited in over 20 years.
--
Bob Morrison, PE, SE
R L Morrison Engineering Co
Structural & Civil Engineering
Poulsbo WA
bob at rlmorrisonengr dot com
Bob Morrison
> It's true that a judge can "pierce the corporate veil". I think that
> happens when people form corps and then pull all sorts of shenanigans
> because their assets are protected. If you run your corp on the up and
> up (definitely keep seperate bank accounts) I think you are pretty safe.
>
Excellent advice. Make sure to keep your personal finances completely
separate from the business accounts.
Pay yourself wages or a salary on a regular basis. Treat yourself like an
employee of the company. Give yourself a reasonable, but not too high
wage (or salary). Any profit at the end of the year, take it out in
"dividends" because you don't have to pay Social Security or Employment
taxes on that money. BTW, throughout the year you can also take "draws"
against expected profits as long as you accurately account for them.
Matt Barrow
"Bob Morrison" <SpamF...@junk.com> wrote in message
news:MPG.1fd74e641...@news.west.earthlink.net...
> In a previous post m...@anonamoo.com wrote...
>> So I am thinking about going LLC because its the next step up
>>
>> Although I have been reading that in this state they can still come after
>> personal assets even if its not gross negligence. basically the judge
>> decides if you are personally liable in the case of a small company. I am
>> guessing they probably always side against the owner.
>>
>
> Most likely there will be no liability protection advantages, but
> there may be some tax advantages to going LLC (S Corp). I think you will
> need to hire an accountant to make recommendations for your particular
> situation.
There's both.
In the event of a legitimate error, you personal assets have protection that
you would not have at all under a sole-proprietorship. There's also enormous
tax advantages in doing a LLC as your taxes are assessed as well as
deductibility.
RicodJour
> > there may be some tax advantages to going LLC (S Corp). I think you will
> > need to hire an accountant to make recommendations for your particular
> > situation.
>
> There's both.
>
> In the event of a legitimate error, you personal assets have protection that
> you would not have at all under a sole-proprietorship.
There are so many details that people neglect that the corporate veil
is often imaginary. Signing a contract and neglecting to add
"President, XYZ Corp." or whatever is a common one.
R
Matt Whiting
> In a previous post m...@anonamoo.com wrote...
>
>>So I am thinking about going LLC because its the next step up
>>
>>Although I have been reading that in this state they can still come after
>>personal assets even if its not gross negligence. basically the judge
>>decides if you are personally liable in the case of a small company. I am
>>guessing they probably always side against the owner.
>>
>
>
> Most likely there will be no liability protection advantages, but
> there may be some tax advantages to going LLC (S Corp). I think you will
> need to hire an accountant to make recommendations for your particular
> situation.
Bob, it sounds like you are saying that an LLC is the same as an S Corp,
but that isn't my understanding. Did I read incorrectly what you wrote
above?
Matt
The Other Funk
m...@anonamoo.com entered:
I am not in the construction business but this is the gist of what I learned
when we incorporated. One, talk to some lawyers. Not just one, several.
Make sure that they have experiance with very small businesses.
Also talk to several accountants. Again find those who know what to do with
very small businesses.
Since most of these folks will give a free consultation treat it like a
class in incorporating. Also, you will be getting information pertaining to
your state.
For the record, we have a corporate attoreny that charges us a small
retainer. I think it's $250 or whatever he gets a hour. If we don't use him,
it gets rolled over for the next year. Our accountant's firm only does small
businesses and sometimes calls us to check in. He doesn't charge for those
calls BTW. He gets an estimated ammount for all the quarterly taxes, payroll
taxes, fees, etc. I never have to worry about paying corp. things on time.
He takes care of it.
One other thing, before you get hooked in to TurboTax, which is a great
program, find out what your accountant uses.
Bob
--
--
Coffee worth staying up for - NY Times
www.moondoggiecoffee.com
Bob Morrison
> > Most likely there will be no liability protection advantages, but
> > there may be some tax advantages to going LLC (S Corp). I think you will
> > need to hire an accountant to make recommendations for your particular
> > situation.
>
> Bob, it sounds like you are saying that an LLC is the same as an S Corp,
> but that isn't my understanding. Did I read incorrectly what you wrote
> above?
My thinking was that in order to get the tax advantages one must organize
as an S Corporation under federal law. From the IRS web site:
A Limited Liability Company (LLC) is a relatively new business
structure allowed by state statute.
LLCs are popular because, similar to a corporation, owners have
limited personal liability for the debts and actions of the LLC.
Other features of LLCs are more like a partnership, providing
management flexibility and the benefit of pass-through taxation.
Single Member LLCs
Generally, when an LLC has only one member, the fact that it is an
LLC is ignored or “disregarded” for the purpose of filing a federal
tax return. Remember, this is only a mechanism for tax purposes. It
doesn’t change the fact that the business is legally a Limited
Liability Company.
If you organize as an S Corporation the last paragraph regarding filing as
an individual is no longer true. So, for the best of both worlds one can
organize as an LLC and an S Corporation.
However, I should mention that the LLC structure does nothing for the
protection of the professional engineer who is a sole practitioner. In
most jurisdictions both the company and the engineer personally are liable
for errors and can both be involved in litigation. The lawyers will
generally go after whichever entity has the most assets. So, you could
form an LLC and have the E&O policy in the name of the LLC. In that case
the lawyers would most likely leave your personal assets alone.
Glenn
talk of an "S" corps but so far just talk. I have never heard of
a LLC. New things every day.
"The Other Funk" <bob...@moondoggie.com> wrote in message
news:bXnbh.11615$gJ1.11436@trndny09...
Matt Barrow
"RicodJour" <rico...@worldemail.com> wrote in message
news:1164823484....@80g2000cwy.googlegroups.com...
Considering a million transactions are handled every day, I suppose there
can be slip-ups, but nothing remotely like the instance you refer to.
--
Matt
---------------------
Matthew W. Barrow
Site-Fill Homes, LLC.
dpb
Bob Morrison wrote:
....
> My thinking was that in order to get the tax advantages one must organize
> as an S Corporation under federal law. From the IRS web site:
>
...
> Single Member LLCs
>
> Generally, when an LLC has only one member, the fact that it is an
> LLC is ignored or "disregarded" for the purpose of filing a federal
> tax return. Remember, this is only a mechanism for tax purposes. It
> doesn't change the fact that the business is legally a Limited
> Liability Company.
>
> If you organize as an S Corporation the last paragraph regarding filing as
> an individual is no longer true. So, for the best of both worlds one can
> organize as an LLC and an S Corporation.
...
I don't think you can do that for a single entity -- it has to be one
or the other. As a practical matter, I can't see any advantage
whatsoever for trying to retain a single-partner LLC as a
parallel/duplicate entity if one has incorporated. There's more
isolation under the corporation articles than under an LLC in most
state's rules, anyway, plus you've already pointed out that there's no
(federal) tax advantage whatsoever w/ a single-member LLC (and states
I'm familiar with follow federal rules in that area as well altho I
suppose there are some that might have their own rules that deviate
there.)
On the professional liability issue, I agree.
The upshot of the whole thread is OP needs to get competent legal and
accounting advice for his locality and position rather than relying on
word-of-mouth from friends and relatives and usenet. Altho some advice
here is worthwhile background, it's not worth much more than the fees
paid. :)
IMO, ymmv, $0.02, etc., etc., etc., ... :)
Fran Bragg
"dpb" <dpbo...@swko.net> wrote in message
news:1164894808....@n67g2000cwd.googlegroups.com...
>
> Bob Morrison wrote:
> ....
>
>> My thinking was that in order to get the tax advantages one must organize
>> as an S Corporation under federal law. From the IRS web site:
>>
> ...
>> Single Member LLCs
>>
>> Generally, when an LLC has only one member, the fact that it is an
>> LLC is ignored or "disregarded" for the purpose of filing a federal
>> tax return. Remember, this is only a mechanism for tax purposes. It
>> doesn't change the fact that the business is legally a Limited
>> Liability Company.
>>
>> If you organize as an S Corporation the last paragraph regarding filing
>> as
>> an individual is no longer true. So, for the best of both worlds one can
>> organize as an LLC and an S Corporation.
> ...
>
> I don't think you can do that for a single entity -- it has to be one
> or the other.
My company is an LLC but we elect to be treated as a Sub-S for tax purposes.
(There is a form to fill out for the IRS) I think that's what he is
referring to. You get the tax benefits of a Sub-S but the simplicity of the
LLC in everything else.
Fran
dpb
Hmmm....I didn't know the IRS gave LLC's that option. If that is so, I
can see it. (I guess what I mean is "that being so" as I certainly
can't argue against what you're doing. )
I was only aware of the section above the Robert had posting on
treating single-member LLCs as sole proprietorships, so I stand
corrected and guess this qualifies as my "new for the day" item... :)
Matt Barrow
> In a previous post marson wrote...
>> It's true that a judge can "pierce the corporate veil". I think that
>> happens when people form corps and then pull all sorts of shenanigans
>> because their assets are protected. If you run your corp on the up and
>> up (definitely keep seperate bank accounts) I think you are pretty safe.
>>
>
> Excellent advice. Make sure to keep your personal finances completely
> separate from the business accounts.
>
> Pay yourself wages or a salary on a regular basis. Treat yourself like an
> employee of the company. Give yourself a reasonable, but not too high
> wage (or salary). Any profit at the end of the year, take it out in
> "dividends" because you don't have to pay Social Security or Employment
> taxes on that money. BTW, throughout the year you can also take "draws"
> against expected profits as long as you accurately account for them.
>
You can probably take them as [quarterly] dividends, enjoying the same
factors as Bob mentioned above.
Also, if you are away from your home office for extensive periods, you can
pay yourself a "per-diem", which is also non-taxable. This, though, has a
few critical restrictions, so find a CPA that goes beyond the superficial in
knowing the more obscure parts of the tax codes.