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An Indie Producer`s catch 22 (Operating on a shoestring)

quickfoot2quickfoot2 subscriber Posts: 1
edited November 2008 in Accounting and Financial Management
In a nutshell . . .
I`m on a shoe string budget, but I want to:
1. Legally separate myself from my business entity and thus significantly reduce my personal financial, legal and tax liability.
3. Avoid excessively complicated tax paper work. (Hopefully only doing this annually, rather than quarterly).
4. Reduce taxes as much as possible.
I am a California resident and I have considered starting an LLC in Delaware; thread:http://www.startupnation.com/forums/8976/1/1#PID79871
But I wouldn`t want to do this if it`s going to make my tax situation ridiculously complicated. (I will likely be doing my own taxes for the first two years that my LLC is in operation.)
What would you experienced and knowledgeable folks recommend that I do?
Best,
Quickfoot2 quickfoot212/1/2007 5:05 PM
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Comments

  • glgcpaglgcpa subscriber Posts: 0 Member
    Until you`re profitable it is rarely adventageous to form a separate legal entity as far as taxes are concerned. 
    For most people they are able to obtain large enough umbrella policies (in the millions) to protect them from liability.  In addition, even after you incorporate, it is highly advisable to have a very good umbrella policy because your legal entity (does really matter which one you choose) will not cover every legal concern you may encounter.
    So, operating on a shoestring budget, I`d definitely say stay a sole proprietor.
    Doing your own taxes - please do a lot of reading first.  The IRS has a lot of great information on their website, for free, take advantage of it.  If you change your mind and would like some help with your taxes, please email me.


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  • quickfoot2quickfoot2 subscriber Posts: 1
    Hi Gina,
    Thanks for your reply. I think you`re right regarding remaining a sole proprietorship. I was actually going through a Nolo Press book on contract law. A well written contract goes a long way toward limiting many types of liability. Of course, it won`t eliminate all liability, and it won`t replace liability insurance, but it goes a long way.
    Thanks for the advice!
    Quickfoot2
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  • VideographyVideography subscriber Posts: 401 Silver Level Member
    Re California - It doesn`t matter where you incorporate, the state will get theirs.  If you incorporate in another state, then California charges a "foreign corporation" tax.  $800 a year the last time I looked.
    The paperwork to form an LLC is pretty simple, but you should be talking to a tax expert.
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