OT: Small business - is an LLC the way to go?

scashaggy

I have talked to several people, including an accountant, who said this is the way to go. I was however told different classifications for filing, such as schedule C, and sole proprietorship.

Guys who have done this, what are your experiences?

I use turbotax to do my taxes. Is this simple to do this with a small business?

MooseDog

In California any form of Corp will cost a minimum tax of $800 whether or not you make a profit. Not sure about other states.

Make an appointment with a tax attorney for an hour or two. It will be money well spent. Lay out the facts:

1) What you plan to do
2) What are your expected income/expense numbers (ballpark figures are fine)
3) What do you have personally to protect (home, other assets - investments etc)

They will advise you on the best way to go. If you decide to go LLC they can do all the paperwork too.

I live in California and have always done sole proprietorships. Easy to set up, easy to wind down. Of course I also have no assets to protect and have never made a huge amount of money in any particular year.

YMMV.

lahmejoon

A CPA should be able to provide you the pros and cons at a lesser billing rate than an attorney.

It depends on what the nature of the business is. If I assume, since this was posted to his board, you are going to be selling cards, want liability protection, and are going to be a one-man show, an LLC would be the best alternative. The LLC would not have a federal filing requirement (if you are the only owner or memeber). You would, instead, report income and deductions on your Schedule C. Your state may have a filing requirement. For example, in California, the minimum tax is $800 annually for an LLC. Further, there is a gross receipts fee if your gross receipts are $250K or higher. The minimum tax and the fee are, essentially, for the privilege of being an LLC and having that liability protection.

If you are not worried about liability protection, sole proprietor would be the best option. In selling cards, I can't think of much liability exposure as long as you are conducting business appropriately.