SP vs. LLC
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SP vs. LLC
I know/understand the differences between a sole proprietorship and a limited liability corporation and am considering the pros and cons of both for The Gilded Cat. However, my pros and cons list aren't making a clear choice for my needs. The business feels new enough that I'm flexible enough to go either way right now. Ultimately, I could go SP until I need the protection afforded by an LLC and then make the switch, but I'd like more input.
Which choice did you go with for your FP business, and what was your primary motivation in making the choice that you did?
Thanks!
-Julie
Which choice did you go with for your FP business, and what was your primary motivation in making the choice that you did?
Thanks!
-Julie
Re: SP vs. LLC
WHY do you want to incorporate? Generally it is done to protect personal assets from company debt. If you aren't incurring business debt on a large scale it generally isn't necessary.
Face painting isn't really a business with lots of capital expenditures and overheads so I, personally, see no reason to make it more formal. It also then requires separate taxes/filings, etc.
As a sole proprietor I can file my business with my personal income tax and only pay (presuming I had to pay, which I never have ) once a year.
Face painting isn't really a business with lots of capital expenditures and overheads so I, personally, see no reason to make it more formal. It also then requires separate taxes/filings, etc.
As a sole proprietor I can file my business with my personal income tax and only pay (presuming I had to pay, which I never have ) once a year.
Guest- Guest
Re: SP vs. LLC
I chose SP, hands down, for tax purposes. LLC companies have to file their taxes quarterly, while SP can file annually. Seems like LLC comes with a lot of baggage that isn't necessary for a business like this, unless you decide you want to have several employees.
Re: SP vs. LLC
Have to agree with the ladies above - but your accountant can tell you best. Unless you are in a high risk business (of being sued) or accruing high debt the (somewhat questionable) protection of an LLC is not worth the hoops and cost. As a partnership where you can allocate the assets and tax burden it might be worth considering (that's what we've done with our web design business).
pixieface- Number of posts : 505
Age : 57
Location : Asheville, NC, USA
Registration date : 2010-10-15
Re: SP vs. LLC
What they said.... and, IF I'm remembering right, one of the considerations of which is if the company is to continue after your retirement/death. As of now, my answer is no, so SP for me.
Can't you incorporate later if your needs change?
Can't you incorporate later if your needs change?
Re: SP vs. LLC
Thanks for the input everyone. My biggest "pro" for the LLC is the liability protection for personal assets. FP is kids and uppity parents - the perfect recipe for a lawsuit in my litigation-happy country. Insurance can only protect one so much and certainly doesn't keep someone from going after you for P&S, thus, my openness to considering an LLC.
Re: SP vs. LLC
Pandora - I seem to remember if you are the sole person on the LLC there is not much protection in actuality. It would stick better if you have a partner in that instance. But it's been awhile since I made that decision so don't hold me to that! This is where I think our accountant was invaluable in her advice. But I'm lucky - we have a good one that is small business friendly and is affordable. Best money I've ever spent is her fees.
pixieface- Number of posts : 505
Age : 57
Location : Asheville, NC, USA
Registration date : 2010-10-15
Re: SP vs. LLC
UH NO, you guys are a wee, wee bit off on this!
I own a candle manufacturing company ( www.SweetScentsCandles.com ), and I can tell you from personal that having an LLC to protect your assets (no matter how measly!!!) is critical, and can help you at time you would least expect it. It is a long story, but I have experienced all of this during a frightening time in my business life. A SINGLE-ENTITY LLC is *exactly* like a sole proprietorship, but comes with essential protections. (Oh, and my little brother is a corporate/contract attorney).
Two caveats: there IS more paperwork with an LLC, but you know what? It takes me under 5 minutes to file my quarterly taxes (I keep a running total as I go)... and I do it online, simple. With a SP you STILL have to keep your accounting in the same good order, you just have to do all your work at the end of the year, instead of quarterly.
Secondly, to get the protections of the LLC, you MUST MUST MUST (I cannot stress this enough) keep a separate bank account and keep your transactions for the LLC completely separate from the individual. It is critical. You can easily and simply make withdrawals to "pay" yourself and you can put money into the account in the leaner times when your business needs an infusion of cash. But other than that, it must remain separate to get the protections.
LLC's are easy to create online. Once you get the hang of it, it is like second nature.
Hope this helps!
Barbie
ps: this applies in the U.S. only - laws are different elsewhere, of course ")
I own a candle manufacturing company ( www.SweetScentsCandles.com ), and I can tell you from personal that having an LLC to protect your assets (no matter how measly!!!) is critical, and can help you at time you would least expect it. It is a long story, but I have experienced all of this during a frightening time in my business life. A SINGLE-ENTITY LLC is *exactly* like a sole proprietorship, but comes with essential protections. (Oh, and my little brother is a corporate/contract attorney).
Two caveats: there IS more paperwork with an LLC, but you know what? It takes me under 5 minutes to file my quarterly taxes (I keep a running total as I go)... and I do it online, simple. With a SP you STILL have to keep your accounting in the same good order, you just have to do all your work at the end of the year, instead of quarterly.
Secondly, to get the protections of the LLC, you MUST MUST MUST (I cannot stress this enough) keep a separate bank account and keep your transactions for the LLC completely separate from the individual. It is critical. You can easily and simply make withdrawals to "pay" yourself and you can put money into the account in the leaner times when your business needs an infusion of cash. But other than that, it must remain separate to get the protections.
LLC's are easy to create online. Once you get the hang of it, it is like second nature.
Hope this helps!
Barbie
ps: this applies in the U.S. only - laws are different elsewhere, of course ")
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