I have searched though all the old post from here and other forums and I feel more confused than when I started. I’m going to be a one man show with no plans to add more people. How do I and how did you decided on which entity you wanted for your company? Any help would be greatly appropriated
LLC or Incorporated
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Do you have an accountant? Much better question for an accountant. I will say starting out you won’t turn much of a profit, assuming you will be dumping cash back into the business so the tax savings an S-Corp would afford you might be irrelevant. Furthermore as an s-Corp you would need payroll, which isn’t expensive but it does cost money. As you become more profitable an s-Corp will probably save you money on taxes. But again, I know a lot about turds and turf accessories, you should have an accountant go over this with you.
We looked at both,it's just me and my son co-owners of the bisines,and an S-corporation was a better way for us to go,it helps so much on taxes at end of year,esp when trump was in office
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I'm LLC. I know you can be an LLC filing as an S-corp. I would go LLC and then see about filing as S-corp perhaps. All depends on what your accountant would recommend that you do but to start with an LLC is the way to go for most people and you can always change it later if you want to.
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Thanks for the feed back. I have a meeting with the account today
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Them only being able to sue the company is what LLC is typically for.
As long as you make sure to keep business and personal finances separate your business could go bankroupt but your personal assets are safe. There is a little but of work to do to technically do things right as an LLC but the most important one and one most often overlooked is what is called "piercing the corporate veil" let's say you use the business credit card to buy groceries and you paid your dentist bill with a company check. Now you mixed finances and "pierced the corporate veil" instead if you make sure to do an owners draw and transfer money to a personal bank account and then pay all personal things from that account then you and your business are separated by the corporate veil.
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There was a reason why S-Corp was better than LLC I just can't recall it at this point,also I applied for a PPP loan this year and because we are an S-Corp we could only use our personal taxes for the PPP,could not use the business taxes for PPP which would have given us way way more money,but o well we got a little
I never knew you could do both
My accountant told me that’s as a one man shop to be an LLC but file as an S-Corp.
That is not right,should be a way to protect personal assets
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It may not be right, but it is true. A first year law student can easily pierce the corporate veil of most one-man shops. It takes far more than filing for a business entity of any type to protect owner assets.
We as an s-corp are protected against being sued personally,they can only go after the business
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disclaimer The following is an imperfect opinion based on my conversations with various attorneys. Each states laws are different as are each individual's circumstances.
People that are in the "right", get sued every day, and they also lose. If the corporation operates as a corporation, then yes it will provide a layer of protection, but there are reasons why the layer is referred to in legal circles as a "veil", rather than an iron mask. You can see through it, and if the wind blows the wrong way on the wrong day, it doesn't even matter if you have it.
If proven through subpoenaed documents that the corporation has failed to follow the laws on corporate viability, then the veil gets even thinner. For instance, if there is any hint of comingling of personal and corporate funds then the corporation may be DOA already. Examples are personal purchases, improperly titled assets, and failure to handle wages/benefits for officers in approved ways. These examples of comingling funds are common in failures of corporate viability. A Forensic Accountant (yep, that's a real thing) can easily expose specifics and establish trends that a court might take into consideration.
Another weak area is failure to act as a corporation. This requires meetings. If there's no established track record of annual meetings, approval of company actions, etc. by the corporate entity, then the court might rightfully question whether or not the corporation is a viable entity. If established that it is not acting as a corporate entity then the corporation offers limited, if any, protection. At that moment the president of the corporation might as well be a sole proprietor in the eyes of the law.
Possibly the biggest risk for small companies is the owner’s personal involvement and/or alleged negligence in whatever caused the liability. If an employee burns a house down, the owner is farther from liability. If the owner is a one-man-shop then not only is the company liable, but so is the owner along with his personal assets. I know of one instance when after getting the max from the insurance company, the plaintiff's attorney convinced the court of the owner's personal negligence partly because he knowingly underinsured the company in comparison to the type of homes, and projects he consistantly pursued.
Tax liability, and business liability are two very different animals, and are proven by different tests. As long as the taxes owed on profit are steadily paid, then the IRS may never care if there are board meetings, look into the way a name is written on a bank account, or consider how an officer gets personal benefit from the business. An attorney suing for $5M because a client’s house burned down with family photos and irreplaceable heirloom items will look at that and more. Depending on what they discover, the corporate veil might blow up like Marilyn Monroe’s dress in The Seven Year Itch.
Of course these are all perfect storm type examples, but that perfect storm day is exactly why business owners look for corporate protection of personal assets.
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If you do something criminal your corporation does nothing to protect you. You own the corporation you are responsible. If it wasn't like that everyone would be a criminal, cheat customers out of their money, f-up their house and they wouldn't be able to sue you because you pretend to be unsolvable and say it's not me it's not the companies' fault? Nope.
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