Incorporate or.....

P

Polished60

New member
So its time to get this business thing legit. I've been doing cars here and there since last fall and figure its time to do what I enjoy full time. Should I just go up to the city's gov't center and get a business license or incorporate. It'll just be me for atleast the first year . As far as taxes and profits go, is incorporting a better option. Do most of you guys/girls operate as sole proprietorships? I've read lots of books on it, but I'm not one hundred percent decided. If I just get the biz license, is it more difficult to reform the business (into a company) down the line? Any advice will be greatly appreciated! Thanks DC.
 
Im not a pro detailer, but i am an S-Corp. I have 20 employees, but im not really sure whats the difference, or when you should be what.

Make an appointment with a lawyer, ask about LLC.

My other business i was a sole proprietor, i ended up mixing my personal stuff with business, and the books were a complete mess. I will never be a sole prop. again, just my .02

WHATEVER you do, pay your quarterlies, even if you go without food!

Dont even ask me how i know....
 
From my books of useless info:


Sole Proprietorship:

Th sole prop. is the simplest and least expensive business type to organize. In a sole prop., one person owns, operates, and leads the business.

Avantages for a S.P.
Easy to create
The owner has full cntrol and responsibility
Makes all the decsions
Ownership is freely transferable
The owner can sell, alter, or exchange all or part of the business

Disadvantages of a S.P.

The owner has unlimited personal liability!!!!!!!!!!!!!!!!!!!!!!!!
The business terminates on the owners death
Business profits are taxed as ordinary income to the owner
 
I'd set it up as an LLC personally. That way you can keep your own personal assets seperate from the business. If you mess up a car then they can only sue you out of business, but they can't get your house or anything else. They can only get the assets of the business. There are many large companies that are still organized as an LLC simply because they don't do the volume to need the tax benefits of going a different route. S-Corp is another option that a lot have gone to. I'd still do an LLC. Its easy and cheap and it will protect you from losing everything if something goes wrong.
 
As my lawyer told me when I started. A LLC or Corp is a waste of time if you carry the proper INS. Think of the most expenssive car you detail is it over 1 million dollars I doubt it. Most garage keeper policies have a enough coverage that you could total the most expensive car and it would be covered under the policy. Think about liability as well if you p/u customer cars think of the other guy if involved in a accident I personally carry 1 mill / 3 million for liability alone. But if you own lots of property or your own home LLC might be something to consider. But The proper Ins coverage is a big factor. But talk to your accountant or lawyer they will have all the legal info!
And a note about LLC's is it is not a 100% gaurantee that you will not loose some of your personal assets. This is what I was told By my lawyer when I was considering the same thing there are loop holes that someone can go thru!
 
Most small businesses are SPs. S corps and LLCs are not more legit, they are just different ways to organize a business. Either way, you need to keep your personal and business finances separate (and don't wait until tax time to try and separate them, do it from day one). The paperwork required to organize and run an SP is less than that of an LLC or S corp. No lawyer required.

IMO, stick with the SP unless you have specific reasons to form an LLC or S corp. Just make sure you have a liability policy for your business as granitestate mentioned above. When you get ready to add employees, you will want to revisit this question, as your liability insurance costs will go up in proportion to the number of employees. At some point, it will be cheaper to operate as an LLC. But as a one man show, SP is the way to go.

My .02
 
I am an S-Corp. I was a sole proprietor for a long time. If you do go S-Corp, you will want ot make sure that you do not comingle the books. I would hold off on it until I had employees. after that, it there might be significant tax savings to be an S-Corp. I saved about $5000 the first year in taxes.
 
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