Recommended type of business? LLC? Sole Proprietor? S-Corp? C-Corp?

[wincen]

What do most people here recommenced as the best type of business entity to use for their Muse?

LLC seems to be very popular, but if your business is a one-man/woman show it seems that your business will be treated as a sole proprietor, in which case is it even worth it?

What does everyone else here recommend?

I'm trying to have a one person business, but all information on recommended business entities would be welcome. After all, I'm sure there are other people here interested in what works for them.


Here's an article that talks a little bit about it:
http://www.microsoft.com/smallbusiness/resources/startups/business-plans-entities/is-llc-the-best-entity-for-your-business.aspx

[dking]

All you have to do is elect otherwise, and besides you get a lot of legal protection from it.

[TimW]

I am the Chief cook and bottlewasher in my business. My wife does my books, but that's because I am nice to her. :)

I formed an LLC to give me some legal protection. For tax purposes, the IRS treats me as a sole prop, and all my business activity goes on a Sched C. The LLC does give me a little more 'street cred' as a business, too.

[kamakiri]

I incorporated a few years to gain a savings on my taxes. In Japan they had a law on the books that if you incorporated as a Yuugen Kaisha (a kind of LLC), you didn't have to pay sales tax for the first full 2 years, so I incorporated in January, and got 2 years and 11 months of no sales tax, saving nearly $37,000.

That aside, go to your bank and discuss it with your banker. I have given that advice many times, but it really is something you should do. A lot of people have a lot of good advice here on these forums, but do you really want to trust your business advice to us? Go get the facts, learn the local laws, run your thoughts by a pro. Your banker is an incredible free resource. Have them introduce you to a lawyer and an accountant. Just the proces of talking to those people will be a huge learning experience. Having a good group of advisers (banker, lawyer, and accountant) will do more for your muse than any kind of business structure you could find anywhere.

[webgal]

I second that. My chief business adviser is my accountant.

[LionelHutz]

In most jurisdictions, an LLC can elect to be treated as either a sole proprietor / partnership, or C corp, for tax purposes. It's a very flexible form of business in this and other regards.

One advantage to an S Corp over an LLC, in which you are also a sole proprietor or partnership for tax purposes, is that you can pay yourself a "reasonable" salary, and take the rest of your profit as a distribution. This means is that if you pay yourself, say, $30,000 as a salary, and take the rest as a distribution, you pay medicare and SSI on only $30,000.

While you might have trouble with the IRS if you work full time and pay yourself a small salary, if you only work 4 hours a week or so, you'd have a nice basis to argue that your salary -- as opposed to passive profit -- should be small indeed!

[EmilWisch]

I agree with running by an accountant & lawyer. They'll usually give you free advice as a trust building gesture. If you take their advice, you are most likely to use their services in the future for payroll services, tax time, etc.

Also, each business structure has pros and cons. You really need to find the structure that fits your particular type and size of business. An accountant or lawyer know the right questions to ask to help you find the best fit.

[JFrenzel]

I would consult the SBDC, this is a non-profit, and FREE organization that can give you the names an numbers of cpas & attorneys whom volunteer their time to entrpreneurs. I had an LLC and now have a S-Corp. I like the way the S-corp works best. But the true answer is circumstance. Just like having a car or bicycle, it depends on your specific situation. Hope that helps.
Oh an btw, it does not matter whether you are a one man show. I am the only employee in my company(omegamasonry.com) and it does give you some protection.


Best to you in your journey

Jose

[frekwentflier]

Which business type you select (if any!) highly depends on the type of business you're doing and how much money you will be making. For example, if you hold investment real estate, you do *not* want to do so in a corporation, only an LLC or LLP.

I've also read that the legal protection offered by a single member LLC is not all it's cracked up to be and that lawyers have many ways around it. That being said, it is only $80 to form an LLC where I live, so I do use them in my businesses. Some are taxed as pass-thru entities, 1 is taxed as a C-Corp. My accountant created the plan for me and I did the paperwork. I found the Nolo books invaluable for this and highly recommend them.

The post above that discusses S-Corp and income vs. dividends is spot-on. My accountant did that for me the past 2 years. Unfortunately, it only works up to a certain income level (about $150k). After that, you need to look at other solutions.

My recommendation would be to not bother with an entity until you're making enough money that you need to worry about it OR if you're holding a valuable asset such as real estate. You can always change to a single-member LLC later if you want, or something else if your accountant/attorney advises it. I don't think it's necessary for an attorney to do the company formation for you, it's relatively simple in most states and Nolo books can help. If you do use an attorney, I would still recommend learning much about the process so they don't rip you off.

[AshokanKid]

I agree with all that has been previously posted as per my own research and experience. After about two weeks of "due diligence" I opted for and self-created an LLC for my biz and a real property holding (passive rental income). I went so far as to hand print and carry the docs to my Secretary of State office and had it all done in one day!

There is tons of great info online (NOLO for one) and it pays to speak with banker, accountant, attorney, tax preparer or local SCORE or small business adviser, many of who are free. To start out one needs to look at your particular state business laws to see what actually must be complied with.

After that, you decide what you need and when. It almost makes more sense to get your biz going first and then see how much money you are going to make (or not) before jumping in with a full blown corporation, whether you are a one person operation or not.

More important than the incorporating specifics is the MAKING of the MONEY, prior to which the corporation is sort of a moot point., :-) That being said, it is best to be prepared and well researched ahead of time so that when the cash flows you know what your options are.

Google for your own state and then add incorporation laws / options and do some reading and research on your own. This will pay you back a thousand fold later on even IF you have an attorney file and create your corporation for you. Best to ya' .,

[makewon99]

my accountant advised that i should form an llc to be the public face and take an s-corp election for it to avoid self employment tax. also form a c-corp to manage the llc the benefit is you can run any insurance through it and be in better shape also you can store up to $250,000 give or take for investment. you should talk to your accountant before doing anything however.

[EelKat]

My business is a one-woman show so I go it as a sole proprietor. I actually have no interest in doing it any other way. For me, my business is all about me, meaning that it changes as I change, it's like an extension of who I am. I like to keep things on a very personal level, with me working one on one with everything, so for me sole proprietor is the ONLY option. :)