# LLC or Sole Proprietorship?



## Quartier (Apr 29, 2014)

Hi all. I'm having trouble deciding whether or not I should do an LLC, a Sole Proprietorship, or something else. Here's some info on my company:

My company is ~7 months old, with less than $5,000 monthly revenue. It is officially a Partnership, although my partner backed out in June. Officially we have no employees, although I do have several people either volunteering or working for commission. I also have independent sales reps. We are specializing in light up t-shirts and accessories; I'm thinking about expanding into regular t-shirts. 

I want to have full control of my company, and I want to make sure no one can take a bite out of it. My ex-partner has decided that running a company is too much stress, so he shouldn't be a problem. I am trying to expand internationally, but I'm going at my own pace with that. What is the best structure for my company in your opinions?


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## charles95405 (Feb 1, 2007)

I have run as a sole proprietor since 1997 without issues


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## TRMMarketing (Nov 22, 2011)

I am not an attorney but for liability reasons I would recommend LLC taxed as a sole proprietorship. This will depend on your state and how it requires corporations be taxed but there is no way I would ever recommend running as a true sole proprietorship as you then place your personal assets on the line during litigation.

I very seriously urge you to seek the advice of a tax attorney in your state as they will provide you with the most relevant shield laws and ensure you safeguard your personal assets.


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## ericsson2416 (Aug 29, 2007)

For sure talk to an attorney, a lot of them will do an hourly consult. Either way at the very least look at a LLC. Since you have people volunteering as well as working for you there's a huge liability on your shoulders right now under a partnership.


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## ekozy39 (May 19, 2014)

You personal assets would still be on the line operating as a single member LLC, and you would most likely have to personally guarantee all loans anyways. Not to mention the yearly LLC fee due..it's $800 in California. It does offer protection from actions of others in your company, but very little financial protection at least at the level you sound like you want operate. I would be more concerned with the advise of the accountant than a lawyer. I would imagine you would have more financial consequences than legal in this business.


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## binki (Jul 16, 2006)

C Corp all the way baby


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## Comin'OutSwingin (Oct 28, 2005)

binki said:


> C Corp all the way baby


Funny you say that, because I was going to say "S Corp all the way!"

I think the benefit of protecting your personal assets combined with the ability to deduct business losses on your personal income taxes (important for new startups) and single taxation makes S Corp the best for just about any serious business situation.

I'm almost 40, and in addition to my "regular" jobs, I've always had some type of business since the day I turned 18. With those different types, I've also had every business structure available, starting out with a sole proprietorship.

S corp has always worked VERY well for me, and I wouldn't consider starting another business without the S Corp designation.

Now that I have a family (which I've had for a LONG time) and assets there is no way I'm willing to risk ANY exposure to my personal finances for a business. So sole proprietorship would never come into play.

Any business attorney, tax attorney, or accountant can help you with this. My first stop might be an accountant that you can pay hourly.


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## Stefano (Aug 5, 2013)

Quartier said:


> Hi all. I'm having trouble deciding whether or not I should do an LLC, a Sole Proprietorship, or something else. Here's some info on my company:
> 
> My company is ~7 months old, with less than $5,000 monthly revenue. It is officially a Partnership, although my partner backed out in June. Officially we have no employees, although I do have several people either volunteering or working for commission. I also have independent sales reps. We are specializing in light up t-shirts and accessories; I'm thinking about expanding into regular t-shirts.
> 
> I want to have full control of my company, and I want to make sure no one can take a bite out of it. My ex-partner has decided that running a company is too much stress, so he shouldn't be a problem. I am trying to expand internationally, but I'm going at my own pace with that. What is the best structure for my company in your opinions?


A lot depends on your state. I ran as a sole proprietorship for 20 years. It was $50 for the trade name and I renewed every few years. I paid fed tax and took business deductions on Schedule C.

A few years ago I started another business and set up a single member LLC to protect my assets. It cost $100 to set it up (no lawyer required) and I pay a $100 annual renewal fee. My wife is my Registered Agent and that saves me about $200 year. I don't have to file a state business tax return unless I make more than $50k/year. Check with a CPA to see what's best for you in your state.


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## binki (Jul 16, 2006)

Comin'OutSwingin said:


> Funny you say that, because I was going to say "S Corp all the way!"


The S corp is kind of obsolete because of the LLC and because it has been abused so much the IRS used to really look at the S Corps. 

The reason I like the C corp is because you can have a fiscal year that isn't a calendar year, it has its own tax schedule and best of all, you can have unlimited cash and non-cash benefits that are not taxable. No other entity can do that. 

And if that wasn't good enough, a C Corp is treated as a person by the constitution so it has all the rights and privileges of a person in the USA. 

For a really good look at what I am talking about see: 
Ker$tetter Letter® 
Corporations


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## Quartier (Apr 29, 2014)

In simple terms what are S Corps and C corps?


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## binki (Jul 16, 2006)

Quartier said:


> In simple terms what are S Corps and C corps?


Read the link I posted


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## Quartier (Apr 29, 2014)

Thank you all very much. I've decided that an LLC is the best choice for my company.


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## ekozy39 (May 19, 2014)

LLC owners particularly if they are single members typically are responsible for more than you are suggesting.


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