Using Legal Structure of Mobile Detailing Service

[ragtopgolfer]

I am sure you are well aware I am starting a mobile detailing company and I appreciate your time and effort in helping answer these questions.



I am now in the planning stages of the detailing company and need help choosing a legal structure for the company. So far I am vaguely aware of the (Corporation (INC), LLC (Limited Liablity Corporation), and also was informed of state registed "C Corporations." For those of you who already operate a car detailing business please help decide how to procede with my legal structure. Thanks again.



Best Regards,



Maulik Patel

[jimmybuffit]

This is one for your attorney, whom you should also consult before entering into a lease agreement. I`ve owned several business entities in the past. The `new`concept of a Limited Liability Company (LLC) can be a useful tool in shielding the Members (shareholders) from liability beyond their investment, while still affording the tax benefits of the lower individual rates.



However, and I am opening my new detailing shop Jan 1, I strongly suggest a simple proprietorship. I simply do not see the need for a more complicated structure. At least in my circumstances, my attorney agrees.



Good Luck!

[Detailing NY]

i am a sole proprietor. I am fully insured and all up to date with the business tax etc.... It can get to be confusing. but stay on top of it and you will not have a problem

[ragtopgolfer]

NY Detailer-



If I become a "sole proprietor" do I have to worry about becoming bonded and insured? (This will be important as I want to do business to business.



thanks !

[Detailing NY]

I always suggest businesses get insurance.



If you have no insurance then the customer can come after you.

look at your insurance thread, i gave you a link to somethig i posted in the past.



Without insurance you will not be able to get contract work for fleet vehicles. What happends if by mistake you drop the PC on the new S500 hood?

[grandprixlar]

You may want to talk to a lawyer and an accountant. I`m set up as an LLC. I detail part time and this allows me to file my fulltime job taxes together with my detailing taxes. My business is not associated with my home or my assets. I use a PO box for a mailing address to keep it separate. In the event someone is going to sue me they would have to break the corporate vale (which is not easy to do) to go after my personal assets.

[medic]

the best items to do to avoid someone from being able to pierce the corporate vail are to ensure the finances of the company and your own are seperate. don`t pay for company expensese out of your bank account and do go the other way either. it`s all your money, but give it to yourself in the form of a salary just to keep it seperate. also when you sign anything for the company, put down on behalf of Acme compnay or whatever teh company name is. You don`t want someone being able to say they assume this was a personal relationship or sole proprietorship - you want to make it clear you`re just an agent.



also, I was under the impression that piercing the corporate vail was only for incorporated companies. since LLC are unincorporated (I guess this could vary from state to state) that wouldn`t be an issue. the biggest threat is that the LLC may be seen as a general partnership in which case your personal assests can be taken in the case of a lawsuit.

[Scottwax]

Originally posted by NY detailer

i am a sole proprietor. I am fully insured and all up to date with the business tax etc.... It can get to be confusing. but stay on top of it and you will not have a problem



Same here. I am set up as a DBA (doing business as) for banking purposes. You cannot deposit business checks into a personal account. I think it cost me $6 to get my DBA which is good for 10 years.



Definitely get insurance. I have never had a claim in 9 years, but with the value of some of my customer`s cars, it would only take 1 mistake to put me in the poorhouse.



Check with the IRS and your local municipality to see what taxes you are resposible for. Some states require service business to collect sales tax, but most don`t. My brother has to collect sales tax on his lawnmowing business, but I don`t have to with my detailing business. Go figure.

[Detailing NY]

Originally posted by Scottwax

Check with the IRS and your local municipality to see what taxes you are resposible for. Some states require service business to collect sales tax, but most don`t. My brother has to collect sales tax on his lawnmowing business, but I don`t have to with my detailing business. Go figure.



you are so lucky. I need to collect 8.25% on all work i do. I hate it because i collect it, it sits in my account for 3 months, then i need to send a check to the irs. I know it was never my money, but just writing out the check really stinks.

NYD

[ararock1]

Medic wrote:



also, I was under the impression that piercing the corporate vail was only for incorporated companies. since LLC are unincorporated (I guess this could vary from state to state) that wouldn`t be an issue. the biggest threat is that the LLC may be seen as a general partnership in which case your personal assests can be taken in the case of a lawsuit.



==========



The basic statement is simply wrong. An LLC is incorporated. Some years ago, small businesses were tired of having the choice between operating as either a corporation (no personal liability, which is good, but very formal paperwork, which is a pain for a small company) or a partnership (easy paperwork, few formailities, but personal liability). A one person, unincorporated business is a sole proprietorship, which legally is like a one person partnership. Plus the corporation has some tax advantages, but not as many as in the past.



Thus was born the LLC, which now is allowed by every state. LLC stands for Limited Liability Company, and it is half corporation and half partnership. Just the good halves. The members (owners) have an agreement between them, like a partnership agreement, and new members can come in and go out exactly as in a partnership. The good news is that the members have no personal liability, just like shareholders.



Forming one is quick and simple and almost any attorney (who does civil work) can do it quickly and cheaply. If not, keep looking. Usually one or two pages are sent to the secretary of state with the filing fee (about $100) and you are off and running.



It is a taxable entity, just like a corporation.



Most states, but not all, now allow one person LLCs.



For a small business, it is the only way to operate, unless you don`t want any business structure at all. I can see no reason why a small business would want to incorporate, even as a C corp, when the LLC gives all the advantages you want with virtually none of the headaches.



Once done, just be sure to put LLC (or "Limited" or whatever your state allows) on your cards and paperwork so that customers can see it and not be able to argue that they were unaware of the LLC (that`s why a corporation has to use "Inc." or "Company" -- to give notice of the limited liability, which can be lost if you do not give notice.

[ragtopgolfer]

Thank you all for your responses.