my husband and I are researching the options here... my business name is my personal name. we are not a husband/wife team, but we DO share in the profits and losses of the business and we own it together but I am the one operating the business. so are we a partnership? we are thinking no... but just don't want to screw up here.
this business is a side business, meaning we are not doing it together to pay the bills.... my husband's job pays the bills right now. so I am thinking a sole proprietorship is the right road here....
any suggestions or advice?
Full Version: sole proprietorship vs. LLC
QUOTE(cmhudson @ April 8 2008, 10:57 PM) 
my husband and I are researching the options here... my business name is my personal name. we are not a husband/wife team, but we DO share in the profits and losses of the business and we own it together but I am the one operating the business. so are we a partnership? we are thinking no... but just don't want to screw up here.
this business is a side business, meaning we are not doing it together to pay the bills.... my husband's job pays the bills right now. so I am thinking a sole proprietorship is the right road here....
any suggestions or advice?
this business is a side business, meaning we are not doing it together to pay the bills.... my husband's job pays the bills right now. so I am thinking a sole proprietorship is the right road here....
any suggestions or advice?
Personally, I've chosen the S.P. route because it works best for me.
California has ridiculous (IMO) corporation fees that I would have to pay if I went the LLC route, and the higher tax rate (self-employment tax) for a sole proprietorship is still less of a tax burden on me here in CA with the level of business that I do. My CPA agreed. Plus, the CPA/filing/tax fees would be higher for an LLC as well.
There are arguments about shielding your personal assets from liability with an LLC, and you'll hear people say "one bad client who decides to sue because they got hurt ... *or insert some random bad situation here* ... and you'll see the value of the LLC..." I guess I'm risking that with my sole proprietorship, but my relatively small portrait business isn't that big of a risky venture.
EVery state and every business will make situations VERY different, and there's no way to say that one way is the right way for everyone.
S-Corp or LLC are your best options, IMO. Talk to your CPA for details on the best choice for your business.
If you own a home and want the protection, then an LLC or S-corp will help with that.
The yearly tax in California is like $800 (even if your LLC doesn't generate a dime) This does not include the filing fee and any other related cost (attorney, cpa).
The yearly tax in California is like $800 (even if your LLC doesn't generate a dime) This does not include the filing fee and any other related cost (attorney, cpa).
I was looking up something else on the IRS website and found this. Don't know if it helps you out, but thought I would throw it out there.
Link
Can a husband and wife run a business as a sole proprietor or do they need to be a partnership?
It is possible for either the husband or the wife to be the owner of the sole proprietor business. When only one spouse is the owner, the other spouse can work in the business as an employee. If a married couple who file a joint tax return elect to conduct their business activities as a qualified joint venture, (a trade or business entity in which the husband and wife materially participate in such venture), the spouses must divide the items of income, gain, loss, deduction, credit and expenses in accordance with their respective interests in such venture. For more information see Election for Husband and Wife Unicorporated Businesses This is effective for taxable years beginning after December 31, 2006. Also, see Rev. Proc. 2002-69 for Special Rules for Spouses in Community States.
References:
* Publication 334, Tax Guide for Small Business
* Publication 541, Partnerships
* Taxpayer Protection Act of 2007
Link
Can a husband and wife run a business as a sole proprietor or do they need to be a partnership?
It is possible for either the husband or the wife to be the owner of the sole proprietor business. When only one spouse is the owner, the other spouse can work in the business as an employee. If a married couple who file a joint tax return elect to conduct their business activities as a qualified joint venture, (a trade or business entity in which the husband and wife materially participate in such venture), the spouses must divide the items of income, gain, loss, deduction, credit and expenses in accordance with their respective interests in such venture. For more information see Election for Husband and Wife Unicorporated Businesses This is effective for taxable years beginning after December 31, 2006. Also, see Rev. Proc. 2002-69 for Special Rules for Spouses in Community States.
References:
* Publication 334, Tax Guide for Small Business
* Publication 541, Partnerships
* Taxpayer Protection Act of 2007
S-Corp, S-Corp, S-Corp!!!!!
Most of the time you can incorporate in any state. I believe that it is popular to incorporate your company in Nevada.
You might make an appointment at the Small Business Administration and ask for an appointment with someone that is familiar with accounting. I got a retired guy that volunteered there and had me set up with an s-corp almost before I got to the door an hour later.
Most of the time you can incorporate in any state. I believe that it is popular to incorporate your company in Nevada.
You might make an appointment at the Small Business Administration and ask for an appointment with someone that is familiar with accounting. I got a retired guy that volunteered there and had me set up with an s-corp almost before I got to the door an hour later.
Understanding what you've said about how your business functions in your life, there are other ways of dealing with personal liability, than setting up an LLC or Corporation. For now you should be fine with solid contracts and insurance policies within your S.P.... if you want to grow or partner, than you can rethink it with a different set of goals in mind. Your accountant will have the best answer for you... especially after you surpass a certain amount of personal income, and would like a way to shelter that income.
QUOTE(Damon @ April 9 2008, 01:19 AM)
S-Corp or LLC are your best options, IMO. Talk to your CPA for details on the best choice for your business.
Thanks for asking this as I just hopped onto osp to see what info I could find about sp vs. llc... and was happy to find the fresh new post on the subject.
it's about time to make this thing legit.
so damon- do you have any info off the top of you head on why s-corp is a better option?
I am not a husband and wife team, however do plan on hiring beneath me to have assistance.
Actually, in a lot of ways LLC is better because it's treated like a Sub-S but requires less filings and paperwork than an S-Corp -- depending on the state of course.
From what I understand both are better than going to sole proprietor route because of the legal protections you receive and the tax benefits you can claim.
If you're really interested in the pros/cons of this I recommend finding your nearest business incubator or SBA office and meet with someone there. At the end of the day business is business, so talking to people with business experience (hiring employees, taxes, structuring your business, etc.) is way better than listening to people prattle on in some discussion forum
From what I understand both are better than going to sole proprietor route because of the legal protections you receive and the tax benefits you can claim.
If you're really interested in the pros/cons of this I recommend finding your nearest business incubator or SBA office and meet with someone there. At the end of the day business is business, so talking to people with business experience (hiring employees, taxes, structuring your business, etc.) is way better than listening to people prattle on in some discussion forum
QUOTE(Damon @ April 10 2008, 09:58 AM)
Actually, in a lot of ways LLC is better because it's treated like a Sub-S but requires less filings and paperwork than an S-Corp -- depending on the state of course.
From what I understand both are better than going to sole proprietor route because of the legal protections you receive and the tax benefits you can claim.
If you're really interested in the pros/cons of this I recommend finding your nearest business incubator or SBA office and meet with someone there. At the end of the day business is business, so talking to people with business experience (hiring employees, taxes, structuring your business, etc.) is way better than listening to people prattle on in some discussion forum
From what I understand both are better than going to sole proprietor route because of the legal protections you receive and the tax benefits you can claim.
If you're really interested in the pros/cons of this I recommend finding your nearest business incubator or SBA office and meet with someone there. At the end of the day business is business, so talking to people with business experience (hiring employees, taxes, structuring your business, etc.) is way better than listening to people prattle on in some discussion forum
true that... just wanted to get some homework done on my end before I step into it.
Thanks again.
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