LLC or Sole Proprietor

endl3ssendl3ss subscriber Posts: 4
edited September 2016 in Business Planning
Recently I have been creating a startup online that's been dealing with social media marketing and handling the social media presences over several platforms of my clients. Now that i have over 20 clients, and the revenue being generated is reaching the threshold of taxable revenue, i was wondering what the best category to create a company would be. I am not really well versed into this business world, im a science major! So any tax help and business license help would be appreciated

A little bit more information, currently most of my clients are underaged entrepeneurs who don't have a readily accessible taxid. I've been getting requests to start acquiring CPAs for their accounts and product management. While right now I am not making income from CPAs, when i do, i will most likely be registering my CPA accounts under my company's taxid, and than passing on 80% of their CPA income to their personal bank accounts. I was thinking this would fall under the category of LLC category, as I am able to pass-through-tax onto their personal taxIDs. Would this be correct? Or would it be better to have sole proprietor business, and declare all the revenue generated as my own.

Thanks!

Comments

  • Ryan O'BlenessRyan O'Bleness Birmingham, Mich. administrator Posts: 1,137 Site Admin
    Hi there.

    While I will not be of much assistance myself, I would recommend you read these articles I have linked below. Each of these articles are quite dated, so remember to double-check that any rules or regulations listed in these articles are current when you file, and make sure you understand them. However, most, if not all, of the content is evergreen.

    Is Sole Proprietorship For You?

    https://startupnation.com/start-your-business/plan-your-business/is-sole-proprietorship-for-you/?utm_source=comunity&utm_medium=12120&utm_campaign=existing-topic%20

    Why Delaware? An Entrepreneur’s Guide to Incorporating or Forming an LLC

    https://startupnation.com/manage-your-business/incorporate-form-llc-delaware/?utm_source=comunity&utm_medium=12120&utm_campaign=existing-topic%20

    Filing a DBA Versus Forming a Corporation or LLC

    https://startupnation.com/start-your-business/plan-your-business/filing-a-dba-versus-forming-a-corporation-or-llc/?utm_source=comunity&utm_medium=12120&utm_campaign=existing-topic%20


    Hope these help!
    Ryan O'Bleness
    Community Manager
    StartupNation, LLC
  • Charlie PCharlie P subscriber Posts: 84 Silver Level Member
    LLCs are always the way to go. It limits the personal liabilities and doesn't become a problem later on when the business becomes successful and you then have to pay lawyers to convert the company over. Plus, the tax breaks are much better in the long run.
  • endl3ssendl3ss subscriber Posts: 4
    Charlie P wrote:
    LLCs are always the way to go. It limits the personal liabilities and doesn't become a problem later on when the business becomes successful and you then have to pay lawyers to convert the company over. Plus, the tax breaks are much better in the long run.
    That's what I'll end up doing :). Is it easy to open one in a state other than the one you live in? (For tax purposes
  • WaterDamageProWaterDamagePro subscriber Posts: 1
    Is it easy to open one in a state other than the one you live in?

    Yes. Many people opt to incorporate in Delaware, Nevada and Wyoming. One of the exceptions though is if you live in California. So say you incorporated in Delaware, you would still need to pay California taxes on the Delaware LLC's income.

    Obviously do your due diligence when proceeding forward.

    -Kobe-
    San Diego's Best Water Damage Restoration and Repair Services
  • JosjonesJosjones subscriber Posts: 7 Member
    I'm sure it's easy if you go through a company that does something similar to what legal zoom does. I'm not referring them or anything but I set up my LLC through them and it was just one less headache I had to deal with starting up, not knowing a good, affordable attorney.
  • ldonahueldonahue subscriber Posts: 1
    Hi, there.

    Warning: This post is a bit self-serving, since my law firm is in the business of providing LLC formations for people (in competition with LegalZoom, etc). But, it seemed it could be helpful to folks on this board with a quick response.

    There are generally four reasons why we tell people to consider to incorporate:
    1. Reduce personal liability
    2. Reduce what you pay Uncle Sam
    3. Survival -- Company survives your death or incapacity
    4. Flexibility -- Easier to form and manage partnerships

    Where and how you form your LLC is pretty important, and does have tax implications. It's hard to give quick general rules, although I'll give you some general issues to consider, in no particular order:
    • If privacy is important, consider an anonymous LLC
    • You can form a LLC anywhere, such as DE, WY, NM, NV or your home state, HOWEVER, you need to register that LLC as a "foreign LLC" in whatever state (or states) you're "transacting business"
    • If you have partners, you really need a decent Operating Agreement and PLEASE make sure it's customized to your specific needs -- ask yourself, what could go wrong? What happens if my partner or partners are crooks? What happens if I want out? Are these situations covered in your OA?
    • Don't let your accountant confuse you about "S-Corps" versus LLC's -- LLC's can be taxed in different ways

    Please feel free to contact me with any questions -- as I mentioned, my firm does this sort of thing and advises clients to help them pick the right entity type. I'm not sure if Startup Nation has articles that better describe what an "anonymous LLC" or "foreign LLC" is, and I don't want to violate the terms of use here by posting my own links. But, we do have a blog that discusses a lot of these issues.

    Thank you. Larry.

    Laurence S. Donahue, Esq.
    Law 4 Small Business
    https://www.L4SB.com/
    (p) 505.715.5700
    <!-- e -->[email protected]<!-- e -->
  • Ryan O'BlenessRyan O'Bleness Birmingham, Mich. administrator Posts: 1,137 Site Admin
    ldonahue wrote:
    Hi, there.

    Warning: This post is a bit self-serving, since my law firm is in the business of providing LLC formations for people (in competition with LegalZoom, etc). But, it seemed it could be helpful to folks on this board with a quick response.

    There are generally four reasons why we tell people to consider to incorporate:
    1. Reduce personal liability
    2. Reduce what you pay Uncle Sam
    3. Survival -- Company survives your death or incapacity
    4. Flexibility -- Easier to form and manage partnerships

    Where and how you form your LLC is pretty important, and does have tax implications. It's hard to give quick general rules, although I'll give you some general issues to consider, in no particular order:
    • If privacy is important, consider an anonymous LLC
    • You can form a LLC anywhere, such as DE, WY, NM, NV or your home state, HOWEVER, you need to register that LLC as a "foreign LLC" in whatever state (or states) you're "transacting business"
    • If you have partners, you really need a decent Operating Agreement and PLEASE make sure it's customized to your specific needs -- ask yourself, what could go wrong? What happens if my partner or partners are crooks? What happens if I want out? Are these situations covered in your OA?
    • Don't let your accountant confuse you about "S-Corps" versus LLC's -- LLC's can be taxed in different ways

    Please feel free to contact me with any questions -- as I mentioned, my firm does this sort of thing and advises clients to help them pick the right entity type. I'm not sure if Startup Nation has articles that better describe what an "anonymous LLC" or "foreign LLC" is, and I don't want to violate the terms of use here by posting my own links. But, we do have a blog that discusses a lot of these issues.

    Thank you. Larry.

    Hi, Larry:

    I appreciate the fact that you are well-aware of the Terms of Service and prefaced your response with that in mind. With that said, your post provided valuable insights and advice for the forum's benefit. This is an example of a post I am perfectly OK with, and in my opinion, if you have a link that is relevant to the topic, and helpful to the community, please feel free to share.

    Of course, things like overly-self promotional posts, posting spam, posting too many links, being off-topic or selling or talking about anything illegal, or something that violates the guidelines in another way, is heavily moderated. I do not believe you violated the guidelines in any way.

    There is also a private messaging option. So, if somebody in our community is interesting in your services, that would be the preferred way for you to communicate with them.

    Thank you for sharing your knowledge!
    Ryan O'Bleness
    Community Manager
    StartupNation, LLC
  • marketinggalmarketinggal subscriber Posts: 28 Bronze Level Member
    Great discussion about LLC. Super helpful. Here's some value, on-topic to save on your LLC set up. I found this promo code for Legalzoom - BEST4B18 - that saved me about $50 today. My new LLC is for a second business that I am starting with partners in New York state. 
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