sole proprietorship or llc?

Discussion in 'The Pub' started by teefus, Mar 9, 2015.

  1. teefus

    teefus Silver Supporting Member

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    any accountants or tax advisors that can help would be greatly appreciated. i am a commercial photographer that is getting a lot of freelance work. i have been asked by several groups i work for to either start a sole proprietorship or llc due to their tax exempt status and the requirements of their organizations. as i understand it a sole p. is just getting an EIN from the irs and filing the state/county paperwork. an llc requires more paperwork and fees but would protect me more. does it make more sense to do the llc? can you start a sole p. and upgrade to an llc at some point? i am in indiana if that matters. thanks in advance for your help.
     
  2. reade

    reade Member

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    LLC offers some take benefits enjoyed by incorporated. I went LLC some time back. You don't need legal zoom to do this just call your state and ask for the form.
     
  3. harpinon

    harpinon Silver Supporting Member

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    You don't need to get an EIN if its just you with no employees. You should keep it super simple if possible. Think about your risks. I can't see you getting sued for taking photo's, but thats your call.
    LLC is cheap and easy enough if you feel you need it. But, the once sacred protections are being eroded by judges who dislike the constitution and there have been many LLC's who were sued and personal property was on the platter because a judge said so.
     
  4. teefus

    teefus Silver Supporting Member

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    thanks for everyone's help so far. it looks like i can do an llc for $90 in indiana. thanks for mentioning not needing legal zoom. they wanted $160 + $90 filing fee. i feel a little better doing the llc. great to know i don't need an EIN since it is just me. very helpful.
     
  5. loudboy

    loudboy Member

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    If you incorporate you need to do a search for your name ($300+) will be unable to do your taxes yourself ($600/yr.) and in NY, you need to pay close to a thousand/year in corporation fees.

    I'd just get a DBA and either use your SS#, or have them issue an EIN for you.
     
  6. EricPeterson

    EricPeterson Member

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    I can't think of any reason anyone would want to do a sole proprietorship over an LLC for a serious business.

    I don't think that LLCs are a constitutional issue. There have always been mechanisms for piercing the veil of corporate structures.
     
  7. harpinon

    harpinon Silver Supporting Member

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    Right, Scott. Protection against bogus lawsuits is not a constitutional protection, but the guilty judges feel as though it seems to be perceived that way.
     
  8. EricPeterson

    EricPeterson Member

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    In my expereince it tends to happen when people form LLCs and then ignore the corporate formalities, co-mingle funds, fail to maintain a proper distinction between themselves personally and the corporation, the lines get blurred, and in those instances, the veil is properly pierced. I think this might be on the rise (I am not sure) and if it is, I would hypothesize that it is due to the proliferation of the use of LLCs that are set up by non-attorneys and lay people with very limited and often mistaken understandings of the law. We (I) encounter these a lot.
     
  9. JSharp3180

    JSharp3180 Member

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    LLC. You are not the LLC...the LLC is the LLC. Keep it straight and there shouldn't be a problem.
     
  10. teefus

    teefus Silver Supporting Member

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    the state attorney's office in indiana has a corp. name search that is free. not sure about the $600/yr to have my taxes done. it looks like i could just add it on my personal taxes, right?
     
  11. straightblues

    straightblues Member

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    The LLC has a minimum annual tax. In California is is about $700. You need to ask the person who is doing your taxes. I would highly recommend getting into a corporation because of the tax advantages and personal protections it offers. If you are really in business, you need to have some sort of corporate protections.
     
  12. photoguy

    photoguy Member

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    30 years in the commercial photography world here. I went Sub-S corp in the beginning on the advice of my accountant. Not sure why exactly or what the benefits/disadvantages are to that route, as I've simply forgotten the original conversation!
     
  13. loudboy

    loudboy Member

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    I would not advise doing your own taxes if you have an LLC.

    I'm just a sole proprietorship and our tax prep, for both household and business, come to about $600/yr.
     
  14. Jason UP

    Jason UP Supporting Member

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    all the tax advice on here is stinky poo poo haha. A single-member LLC is a "disregarded entity" for tax purposes. As is a sole proprietorship. So literally the same effort on taxes and no difference whatsoever. If you take on a partner down the road (which seems pointless in your case) the entity would then require its own tax return (form 1065). As a single-member LLC or sole proprietorship, both are simply reported on your Schedule C of your 1040. Use quickbooks for your business and keep good records, and don't intermingle personal vs. business if doable (and get its own bank account). Then at tax time cash income and cash expenses are easy to get into a tax return (you'll be cash basis, not accrual basis). Report income when paid, record expenses when paid. Determining deductibility of certain indirect expenses is something you can ask around about or get advice on (e.g. business miles vs. "contributing" your car to the business and capitalizing / depreciating there, home office, etc.) at tax time. Like the dude above says his sole proprietorship and personal are $600...if he were a single-member LLC, that and personal is $600 then too as it's no different. If your records suck though, it'd probably be more expensive as $600 is pretty darn cheap (or maybe our rates are high haha) so I assume he keeps solid records and just tells the dude what #s to plop into the return.

    An LLC adds a layer of legal protection against personal assets (think of it as comfort for your fee you pay to set up) but if fraud or malfeasance or whatever, like someone said above, the "corporate veil" might get pierced. But for the most part you won't ever have to worry about that. I'm a CPA, not a lawyer, so yeah take the legal part with a grain of salt but my experience is "don't sweat it, mon". Set up the LLC, name it whatever (it doesn't matter a hill of beans....you're dba is your name or whatever), take 7 minutes on the IRS website to get an EIN (form SS-4) and enjoy your ride along the bureaucratic express.
     
  15. teefus

    teefus Silver Supporting Member

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    thanks for all the info. i appreciate everyone contributing and informing me. god bless.
     

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