Incorporating vs. sole proprietor

[bull]

I've had a part-time, on-again off-again small business for years and now I'm thinking about expanding it and seeing how far it will go. I may employ my nephew and/or brother who live in a different area but not far from where I am and I've heard corporations are good for family employees.

Anyway I'm wondering if some of you small business owners could give me some advice on which is the better way to organize. Or is there something better such as LLC, LLP, whatever. The business is pest control (specifically mole trapping) typically done in people's yards and sometimes on acreage.

If it gets big enough maybe I'll sell it and my customer list and start over on a smaller scale again.

[NHCharger]

I originally had my construction company incorporated. My accountant said I didn't do enough business  and was wasting my money as a corporation. I switched to a sole proprietor. As a corp. your supposed to pay yourself as an employee and deal with all the FICA, S.S. taxes, quarterly reports (941's), etc.
As a sole prop. I just paid myself when needed without deducting all the taxes, and just payed an estimated quarterly payment to the IRS. A LOT less paper work for me and the accountant.
I also have an LLC company set up. My Dad and I jointly own 12 rental units and we use the LLC as the management company and the owner of the apartments. The LLC acts as a corp. in some aspects as it can shield your assets from the assorted dirtbags and sue happy lawyers. The LLC's weren't really popular when I switched to sole prop. back in 1991. That might be the way to go. You really should check with your accountant. He knows your situation better than anyone here on the board.

[bull]

I originally had my construction company incorporated. My accountant said I didn't do enough business  and was wasting my money as a corporation. I switched to a sole proprietor. As a corp. your supposed to pay yourself as an employee and deal with all the FICA, S.S. taxes, quarterly reports (941's), etc.
As a sole prop. I just paid myself when needed without deducting all the taxes, and just payed an estimated quarterly payment to the IRS. A LOT less paper work for me and the accountant.
I also have an LLC company set up. My Dad and I jointly own 12 rental units and we use the LLC as the management company and the owner of the apartments. The LLC acts as a corp. in some aspects as it can shield your assets from the assorted dirtbags and sue happy lawyers. The LLC's weren't really popular when I switched to sole prop. back in 1991. That might be the way to go. You really should check with your accountant. He knows your situation better than anyone here on the board.

True. However, I did consult him and he told me he recommends a sole proprietor for me but I'm not convinced. The nature of my business does present the possibility of injury lawsuits so I'm somewhat leery of sticking my own personal neck out there as a potential cash cow for those who might sue over real or imagined injuries. Even if you have insurance they can deny your claim if they want to. An LLC would insulate me and my personal assets from the business. From a tax standpoint I think an SP is good but from a legal/liability standpoint I think being incorporated would be better. I can't imagine an LLC being too much work if I don't have but one or two employees.

[Vainglory, Esq.]

My experience with LLC's (which is in Texas, and state laws and procedures vary) is that they are very easy and cheap to set up, and their potential for protecting you from legal liability may be invaluable.  Sure it's some extra hassle, but I would think it's definitely worth it.

[ck1]

Our x-mas tree farm is a LLC for the reason of lawsuit and stuff mentioned above thet protect our personal assets and the land itself thet was set up by a very good land lawyer and accountant, our relatives and friends that help out don't exceed $11,000 so we just give them a really nice gift...............

[Neal_J]

LLC is the way to go.  Quick to set up and administer and minimized liabilty.

Neal J, CPA
(yes, really)

[MichaelRW]

I'm not sure how the IRS treats corporate income for tax purposes in an LLC but my accountant recommended incorporating (as a corporation) and then filing with the IRS as an "S" corp. As I understand it what this does is treat any corporate income as ordinary income. What I mean by this is as long as you pay yourself a "reasonable" salary as the president of the corporation, any profit over and above your pay is just ordinary income and therefore you won't have to pay any corporate taxes on it or SS taxes, etc.

So I did incorporate for the tax purposes and also for the lawsuit protection. Also, if you should incorporate don't use your own name for the name of the corporation. This can cause undesirable consequences.

[dkn1997]

I'm not sure how the IRS treats corporate income for tax purposes in an LLC but my accountant recommended incorporating (as a corporation) and then filing with the IRS as an "S" corp. As I understand it what this does is treat any corporate income as ordinary income. What I mean by this is as long as you pay yourself a "reasonable" salary as the president of the corporation, any profit over and above your pay is just ordinary income and therefore you won't have to pay any corporate taxes on it or SS taxes, etc.

So I did incorporate for the tax purposes and also for the lawsuit protection. Also, if you should incorporate don't use your own name for the name of the corporation. This can cause undesirable consequences.

The electrician I used to work for does this, he's an S corp.

[Chargen69]

LLC is the way to go for me anyway.  You file taxes under the schedule C section of the federal form.