How do YOU conduct business? April '08 Survey

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How is your shop set up, as a business/tax entity?

  • NONE/DOES NOT APPLY/DONT KNOW

    Votes: 1 0.7%

  • Sole Proprietor/Personal Responsibility (1040 C)

    Votes: 56 37.1%

  • Traditional Partnership (1065)

    Votes: 2 1.3%

  • LLC/Limited Liability Company or LLC Partnership

    Votes: 38 25.2%

  • S-Corp/INC

    Votes: 45 29.8%

  • C-Corp/INC (1120)

    Votes: 8 5.3%

  • Trust (1041)

    Votes: 0 0.0%

  • Non-Profit Organization (990)

    Votes: 0 0.0%

  • OTHER (please explain in post)

    Votes: 1 0.7%
  • Total voters
    151
  • Poll closed .
Mike Labbe

Mike Labbe

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Which type of entity is your business? April 2008 Grumble Survey
Results are anonymous​

A discussion and survey of how shops have chosen to set up. Tax benefits, legal and liability protection issues, etc.


Grumble surveys are purely for entertainment value, and to generate healthy and friendly discussion. Your participation is welcomed!
 
I would reccomend to any sole propiertor to set up a S-type coppration or LLC for your own personal protection and some of the tax advantages. I'm no tax accountant or lawyer and it's has been a while since I've incorporated but I like knowing there is a firewall between me and the world.
 
I can't believe that there are so many Sole Proprietorships. WOW! The only reason, that I'm one is because of the tax advantages in my state for being a home based business. If I were in a retail setting, you betcha that I would at least be an LLC. An S-Corp I can't see all the benefits just yet. In the litigious society that we live in, it's risky business to do so without.

dave.
 
I am a LLC partnership. I clicked LLC as I think that is closer then a plain partnership.
 
I set up an LLC for another business I had. As explained by my tax person there is no real tax advantage over being a sole proprietor.

As explained by my attorney, yes there is limited liability protection for you as a business. BUT, a person can turn around and sue you as an individual. My understanding is if I, as a framer, damage somebodies Kinkade worth a gazillion dollars and they don't get what they want from my business, they can then sue me personally as the individual who caused the damage.
 
If you are a one man shop and on the premises at all times, you are going to be sued personally, LLC or not if that is where the assets are.

You beat me to it, Denny.
 
My old business went through the transition from a sole proprietorship to a partnership to an S Corp and then finally a C Corp.

When I started my one man show I started with an LLC. According to the feds when I got divorced the LLC automatically was dissolved as you cannot have an LLC with only one member.
 
Dave said:
When I started my one man show I started with an LLC. According to the feds when I got divorced the LLC automatically was dissolved as you cannot have an LLC with only one member.
Click to expand...

I vaguely remember contacting the Federal IRS with a question one time and was told they do not recognize any LLC. To them it's just a sole proprietorship.
 
There are some subtle differences between an LLC and an S-Corp, in terms of handling of social security taxes on the owner's salary. In terms of shielding the owner from liability, they are pretty much the same. The S Corporation was designed to give small businesses a hybrid between corporations and partnerships -- the business has the liability shield of a corporation, and the income pass-thru of a partnership. The LLC was a later creation, but does much the same thing.

No corporation will shield its owners from liability, however, if the owners fail to maintain a distance between legitimate corporate activity and personal activity. If you are paying all or most of your personal expenses through the corporation, and you get sued in a slip-and-fall case, there's a good chance the court will allow the plaintiff to go after your personal assets. This is especially the case if the corporation is undercapitalized.
 
Dancinbaer said:
I set up an LLC for another business I had. As explained by my tax person there is no real tax advantage over being a sole proprietor.

As explained by my attorney, yes there is limited liability protection for you as a business. BUT, a person can turn around and sue you as an individual. My understanding is if I, as a framer, damage somebodies Kinkade worth a gazillion dollars and they don't get what they want from my business, they can then sue me personally as the individual who caused the damage.
Click to expand...

I'm not sure about that. They traded money with the business, not you. The business is its own corporation with a federal tax ID #. They would be limited to going after the company's assets and not you or your home. To go after you personally, they might have to prove that you broke the corporate veil.

That's how it was explained to me, in any case.

Mike
 
Dancinbaer said:
Wouldn't you be an LLP? Maybe that should be added to the survey?
Click to expand...

Ill do that now. LLC Partnership will be grouped with LLC Regular

Mike
 
Up until recently, I was a C corp. About three or four months ago my CPA switched it over to an S corp. Everything I own, except my airplane, is actually owned by my trust. I just haven't gotten around to putting the bird into it yet.

John
 
JRB said:
Up until recently, I was a C corp. About three or four months ago my CPA switched it over to an S corp. Everything I own, except my airplane, is actually owned by my trust. I just haven't gotten around to putting the bird into it yet.

John
Click to expand...


So John, if you got sued, for a slip and fall. Wouldn't they be able to sue you for everything you own then, except for your airplane? What kind of plane do you have?

dave.
 
Dave, I wish I could say it was a cool plane like a mustang or such, sadly, I'm a picture framer. What I have is a very sweet little Piper Warrior II. I've owned her for about 1 1/2 years. Very clean N997SG

I think corrupt minds must think the same, as soon as I made that post, I started thinking the exact same thing, I'd get to keep my airplane.

John
 
Bumped as a reminder for those who have yet to participate.

Discussion welcomed.

What advantages does one have over another? Are you sufficiently protected from a liability claim?
 
If you overlay the percentage of framers who operate as a sole proprieter with the annual sales, I'd say there's many of us paying more in self-employment taxes than we need to. My CPA once told me that they consider about $60k in annual sales to be the break point to become an S corp. Naturally, you should talk to your own accountant about whether it would benefit you.
 
From the Fed IRS site - and I'm a single-member LLC, btw:

Limited Liability Company (LLC)

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.
Owners of an LLC are called members. Since most states do not restrict ownership, members may include individuals, corporations, other LLCs and foreign entities. There is no maximum number of members. Most states also permit “single member” LLCs, those having only one owner.
A few types of businesses generally cannot be LLCs, such as banks and insurance companies. Check your state’s requirements and the federal tax regulations for further information. There are special rules for foreign LLCs.
For additional information on the kinds of tax returns to file, how to handle employment taxes and possible pitfalls, refer to Publication 3402, Tax Issues for Limited Liability Companies (PDF).
 
RESULTS POSTED APRIL 2008 SURVEY

The results are in! Although the poll is closed, discussion is welcomed.

I was surprised to see so many Sole Proprietors.

How is your shop set up, as a business/tax entity? (161 participants)

38% Sole Proprietor/Personal Responsibility (1040 C)
29% S-Corp/INC
25% LLC/Limited Liability Company or LLC Partnership
05% C-Corp/INC (1120)
02% Traditional Partnership (1065)
01% OTHER (please explain in post)
01% NONE/DOES NOT APPLY/DONT KNOW
00% Trust (1041)
00% Non-Profit Organization
 
Hi all - thanks for all your posts and always being a great resource!


I am a single member LLC but filing as a S-corp.
After incorporating I filed a form 2553 (Election by a Small Business Corporation) and can now file a S-corp return.

Before opening I participated in a workshop given by my local SCORE and learned a HUGE amount from the retired and semi retired biz experts.

Business entities where discussed in great detail.
I highly recommend the SBA and SCORE as valuable resources for those starting up or changing their business at any level. It gives you alot of background before you are into it.

This really helped as I chose my accountant and lawyer. Otherwise I would not have known what questions to ask.

BTW, the first accountant I spoke with did not know about this option. The one I settled on also uses this entity as filing method so I am sure they know the ins and outs.

Mary
 
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