OT: Anyone a cpa or lawyer?

Sets

don't know what happened to other one but:
As a card dealer am I better off being a S Corp or an LLC? and why?

stormsurge

Both will limit your liability but it comes down to taxes in my opinion. An S Corp has less severe tax consequences than a regular C corporation but in most cases for small businesses I would suggest giving the LLC format a hard look.

I'm not an expert though just went through the same process several years ago.

Rich

5thScaleRacer

It depends on what State you want to register in, but generally you will want to go with the LLC

much simpler to setup and maintain...no archaic rules to follow

You may want to go to http://www.nolo.com for more self help information. It's a great resource.

larryallen73

I am a California attorney who does a fair amount of this type of work. The annual fees are very similar, in California, for these two entities. Additionally, taxes are generally going to be about the same. A few small differences but nothing of note. I would say most small business clients that I have, again in California, generally use an S-corp. We see LLC's used more for clients with real estate holdings as tax treatment is better for real estate in an LLC than in a corp. Liability protection is the same in both. Always remember to follow corporate formalities whether S-corp or LLC; that is, keep money in separate bank account, do annual minutes, etc.... Good luck.
P.S. For a lot of clients an LLC and/or a corp are NOT even necessary. If making less than $75k and no big liability issues might want to just be a sole prop and do a schedule C on your tax return. Deductions are almost the same and you avoid a grand a year in min tax.

Treetop

larryallen73

If your filing as a sole prop on your personal tax return, are your personal assets (retirement account / Home) still protected if liability issues arise?

I live in California and right now I'm leaning toward creating an LLC

Thanks,
Mark

Stone193

Mark, Simpsons etc.
I live in Texas and am a PC/S-Corp I believe - since there is a homestead law in Texas, they can't touch your home e.g. In the short run, IMO, you'll save a boatload of money being a proprietorship since there are corp set up fees with a lawyer and you will need a CPA to do your taxes and they all get some serious coin to do the corp taxes. I had a bookkeeper do my personal return and I own the business building and it only cost me about 300 bucks. I paid the CPA over 2 grand to do the corp taxes! So keep that in mind too.
Just my own experience - if I had it to do over, I would have gambled and saved a ton by not incorporating since no liability issues have come up yet.
Also, how many employees do you have? That is an important question along with how much liability your business potentiates.

your friend
Mike

Treetop

Mike,

Thanks for your input. Not sure which direction I’m going with employees. My wife might be one. What the deal is, I have a great day job and a few years ago I started selling cards on ebay to help save for a down payment on a home here in Orange County California (Orange County is very, very expenses these days). My wife and I purchased that home early last year. Will since then I picked up a fairly nice collection of sport cards and keep selling cards. Its now generated enough $$$ so that my wife can quit her job and be home for our children. Since I purchased that collection, I ran across another collection and purchased that one also and been doing very well. And when I look at the cards I still have, I have enough cards to sell from early 60's- early 70’s for a couple of years and that’s just the gradable stuff. Then comes the exmt/nrmt raw stuff. And this is if I don’t even buy another card.

I guess with the extra SS taxes I’m paying this year, I’m taking a slight hit, but I also understand that if I go LLC / Corp I won’t be paying the SS tax (and SS is like a sinking ship these days) I can purchase a vehicle under the LLC and write off that100 percent, along with other office related expenses, such as the new computer system I’ve been eye balling, along with that LCD TV, I mean monitor

Bottomline is that I really enjoy the card business and My goal is to quit my day job within the next few years also

Stone193

Mark
If you set up a corporation, it doesn't pay SS but you will - there is no way to get around that - the way it works for me - I'm an employee just like the people who work for me - in fact, I use one of the biggest companies in the US - Paychex - they do all the paperwork/quarterly filing/paying of taxes etc.
Again, I could be wrong but there is very little savings unless, perhaps, you make a boatload of money.
It has more to do with personal and professional business liability - i.e. the corp can go bankrupt without a mess of people knocking down your door and perhaps taking your house. And, unless you can prove that the car is used all the time for biz, you can write off travel on a personal car also - like in your situation going to the PO or Sams or whatever for supplies etc.
Just something to think about - last suggestion - you may want to see if anyone knows a good CPA and have a meeting a with them. And take what is said carefully - afterwall, PSA doesn't tell you it is better to keep you cards in toploaders?LOL

your friend
Mike

Sets

Thanks for all your help, I am sure treetop appreciates it too. I have 1 employee at the moment but I am looking for another. That nolo site, seemed pretty good. I will reread this post again in case I missed anything. Thanks.

Treetop

Thanks Mike,

Time to disgest and sit down with the pro's and figure out what's best.

Mark

larryallen73

Looks like you got lots of input so I will summarize that liability is probably very low so liability protection is probably not needed for a card business on Ebay (no matter how much you sell). The corp (or LLC) min tax in California is about $800 a year, plus a CPA (as stated by someone above), plus other misc costs. Bottom line, I doubt you should incorporate. However, one thing that is different between a sole prop and a corp is that a corp can deduct 100% of health insurance premiums and a sole prop is limited to 50% I believe. Verify with your tax/legal help in the OC. Good luck!

Stone193

Larryallen
Great input and advice...thanx!

your friend
Mike

Love of the Game

Mark:

I just went through the process of changing my business from an LLC to a corporation; we are electing Subchapter S within the next month.

I did this for two reasons: first, to further limit liability. As a corporation, the chances of a lawsuit attaching itself to my personal assets are slimmer than when the company was an LLC. My company is an advertising agency, and the likelihood of a lawsuit is slim - however if there ever was one, it would be a large one. Additionally, we conduct business in an office - employees, vendors and other visitors could potentially sue for personal injuries when in my office. You might want to bear this in mind in the event that you ever opened a storefront.

The second reason was mentioned by Mike, above. As a corporation, I am an employee. This means I collect a paycheck each week, with all income taxes deducted (Mike uses Paychex, I use Ceridian, both are similar). I am in the middle of establishing a retirement savings program for employees where I can contribute pre-tax salary dollars just like a 401(k). I can also buy health insurance under a group plan with as few as two employees - the payroll service enables me to have the salary, taxes, retirement contribution and health insurance all deducted from my paycheck automatically. At the end of the year, any profits remaining in the business above $50,000 will be bonused out to the corporate shareholders (leaving the company lean), but profit up to $50,000 is only taxed at a rate of 15%.

As mentioned above, dealing with corporate red tape is cumbersome and expensive. However, limiting liability and going on the payroll are very clean, and you avoid the ugly self-employment tax. For my business, the extra accounting expense and annual minutes are worth it.

-Al

Stone193

<< <i>For my business, the extra accounting expense and annual minutes are worth it. >>


Al
You just reminded me that I am a few years behind in the paperwork to the corp!

Another thing - depending on the company you use, you can lease the employees as opposed to regular employment. Can't remember but there are some benifits to leasing like if they make an unemployment claim, it is not against you but rather the leasing company - thus they will take the time to fight it where I would just roll over since it's not worth the time to go downtown to a hearing.

I agree with the liability before the fact, and after a quiet 5 yrs., it has been expensive with a start up operation. When you start keeping assets in the corp and not "drawing" it out - as Al said - the rate of income tax is less - if you had a proprietorship - all assets would be yours and subject to personal income tax. But in Texas, you also have to pay a 'franchise tax' on the earning to the corporation.
I believe I have this correct.

Now if you own the building, there are benefits to owning it personally and leasing it to the corporation.

As Beavis would say: This is getting complicated!