HELP with choosing business entity?
Here's the deal:
This is for a business cleaning commercial offices and party/event cleaning.
I have already filled DBA sole proprietor, this is the only step i have taken so far. I will be insured and bonded.
I haven't done anything yet because i still have to get my business address and business license, among other things.
I know the decision is mine but I have spoken to various people and the answers are somewhat different. A CPA says, since its just me and i have no assets at risk, just stay sole proprietor.
Another friend of mine who owns his own business says to go s-corp because if i get sued, you are not liable and this choice provided the best protection.
I own nothing but my car and my credit isn't the best "(due to student loan debt which i am currently paying on).
I am doing a lot on reading on the different entities but now im just totally confused on what to do.
Would it be better to just stay as sole proprietor, or change to an LLC or S-Corp? since this is really just the beginning stage of my business.
Keep it simple and start as a sole proprietorship. If you are concerned about possible lawsuits the CPA was right in that you are "judgment proof" = No assets. The important thing is to acquire the proper type of insurance with adequate liability coverage for yourself and employees /contractors (if you have them). Never work without valid insurance. This is how you protect yourself/business as a sole proprietor. When the business grows and you can afford it, incorporate.6 months ago
check out my bio
i USED to suggest everyone go LLC
I deduced after studying the practicality of org structures, I decided that all new biz's should
JUST DO, IF the hiring party needs to see your license
do a proprietorship
otherwise, just start your activity without a biz license at all.........
then do a proprietorship if you have not done so; and buy liability insurance
an LLC and biz insurance are synonyms IN PRACTICE.
Can guide further
You should stay as a sole proprietor. Make sure to get liability insurance. This will protect you if you get sued. You may have to pay LLC fees if you decide to setup an LLC. In CA the LLC fee is $800/year. LLCs and S-Corps are more beneficial if you have partners, but since it's just you then the easiest route would be a sole proprietorship.
Source(s)by Forgiven81 - 6 months ago
There are six types of business structure that are possible in the USA. Let’s discuss them one-by-one.
Sole Proprietorship: This is the simplest business structure and usually involves one person who owns and controls the business.
The advantage of this type of business structure is you will have full control and ownership over your business and will not be answerable to any other outsiders. This not only gives you the advantage of enjoying the entire profits from the business but also puts you in the driver’s seat whereby you can take your own decisions on day-to-day activities of the business.
Partnership: This is the easiest entity to form in case your business is owned by more than one person. Partnerships are broadly classified into: general partnerships and limited partnerships.
In a general partnership, the business is owned jointly and severally by all the partners. They will run the business on behalf of each other and are responsible and liable for actions of each other and that of the business. Similar to sole proprietors, partners of a general partnership are also exposed to the risk of personal liability. In partnership businesses, all partners are liable and accountable for acts of other partners. So this exposes them to great personal liability and financial risk. Partnerships are also more expensive to form than sole proprietorship.
The Corporation is a relatively more complex business structure as compared to sole proprietorship and partnerships. One of the major advantages of a corporation is that the corporation itself is a separate legal entity separate from its owners. This means that the person assets of the owners are protected and are not subject to risk of liquidation in case the corporation fails to pay off business liabilities.
Many businesses choose this business structure because of the protection it gives to their personal assets. The corporation’s liabilities and debts are not that of the owners. Hence the owners’ assets and personal belongings will not be put at a risk if the corporation defaults in repayment of its liabilities.
S Corporation (S-Corp): An S-Corp is a more attractive option to small businesses (since the number of shareholders is restricted to 100) than a regular C-Corp. One major plus point with an S-Corp is that that the tax is passed on to the shareholders. Hence there is no question of double taxation as in the case of a C-Corp.
An S-Corp also gives the flexibility to maintain accounts on a cash basis for certain businesses. This means incomes and expenditures are taxable/deductible as and when they are paid. So, if you have a bad customer who doesn’t pay, you need not pay tax on it until you receive the money.
Limited Liability Company (LLC): An LLC is a hybrid entity that brings the best features of partnerships and corporations. Similar to S-Corps, the profits of an LLC pass on to the shareholders and hence there is only one point of taxation.
Another important feature of an LLC is that it can have unlimited investors and these investors can be allowed to freely participate in the operations and activities of a business.
Source(s)by Kishore - 6 months ago