I'm Registering My Businesss: Need Veteran Advice

[schmeg007]

I've recently decided that I want to have a registered company so that I can legally make websites for small businesses in my area. I'm not too worried about operating the business much, mostly I'm pondering the issues involved in the actual creation of the company.

What type of business to create
I plan on being in complete control of the business, as I do not have guaranteed commitments from those who will be involved in the business with me. So I think I have two general ways I can go.

1. Sole proprietorship: 100% my company, and 100% liability. I would hire my associates as contractors and pay them according to the work they put in.

2. LLC: I could give certain amounts of the company to people and assign profits more easily to those I think deserve it. Less liability, though I have received mixed answers about how reduced the personal liability actually is.

I don't plan on doing anything special with my company. I just want to make websites for local businesses, ecommerce solutions, and provide the hosting service if needed. I'm sure there are more than a few people who visit this site who have done exactly this, or something very similar.

Even if you aren't in the same business, I would greatly appreciate any information from someone who has set up their own company.

Lawyers: Yes you can tell me to talk to a lawyer, I plan on doing that in my last phase. After I have figured out as much as possible on my own. So please, share your knowledge with this poor, confused fellow.

[cltwebs]

I also setup a Sole Proprietorship rather than LLC last year. I do think that in next couple of years I will convert to LCC.

I think starting out costs maybe too much to start a LCC that's one reason why I did the Sole Proprietorship to see how things works out.

If it's just yourself a believe that your ok now its when you have other people involved where may be more sticky and you may want an LLC to protect yourself.

Just my thoughts.

[bMind]

In Canada, I would suggest you go with Sole Proprietorship rather than Corporation if you business income doesnt exceed $250,000 annually.

Below are my 2 cents,

1. If you are a one man company, most likely you will be working at home, that means you will be setting up a home office. When your work space is in your home, there will be tons of tax deductable expenses such as your home maintenance costs. If you own your own home, you can also deduct a portion of the property taxes as business expense also.

2. Set up cost for Sole Proprietorship in Canada is basically free if you choose to use your own name as a trade name. Otherwise it would cost $30 to set up a trade name. Setting up corporation is about $700.

3. As a sole proprietor, you might be able to claim tax credits a corporation could not.

4. There will be more paperwork, money and legal issue involved in maintaining a corporation. Why deal with this when you don't have to?

5. 2 tax returns to file every year. One for your personal income, one for your business, that means cost is higher.

6. If you are a sole proprietorship, you basically assume all responsibilities for the business. But who cares? How much you think you are going to spend sitting at home and working for someone and collecting money at the same time?

I suggest you seek legal advice if you insist to form a Corporation, but I wouldn't until I make my first $200,000 annually.

Again, this is my personal opinion. Ask your questions, I will try my best to answer.

[South]

We have set up two seperate types of business, Sole Proprietorship and Corporation. From what your intentions are as I undestand them, I would certainly go with Sole Proprietorship.

There are certain tax and security advantages to a corporation, but not nearly worth the headache or expense for what you're doing. You HAVE to name officers, you HAVE to have meetings, so on so on.

Setting yourself up as a legitimate business is a good idea. You get an TAX ID number which is handy for a number of things, and suddenly all of your computer equipment is tax deductable!

[yankeeman]

Have you considered a Sub Chapter S Corporation?

[John Scott]

schmeg007

Unless you plan to hire employees, keep it simple and go with a sole proprietorship. Corporations are so much work. So much paperwork. Truly a PITA.

[TerrelShumway]

Originally Posted by yankeeman

Have you considered a Sub Chapter S Corporation?

LLC's exist because Sub Chapter-S Corporations have way too much paperwork and too many restrictions for most purposes: S-corp was the problem. LLC was the solution.

LLC is great if you need asset/liability protection, but until you have been in business for two years (and probably making $200k) you will probably have to personally guarantee most loans anyway, so what's the benefit? Start with the sole proprietorship.

Terri Lonier goes into a bit more detail in her book Working Solo. I recommend this book to anyone considering a solo gig, because it is so jam packed with useful business information in general.

http://Terrel-recommends.com/working-solo/

[yankeeman]

I operate a Sub Chapter S and there is no additional peperwork
required. A sub S is one step aboce a Sole Propietership.

A Sub S does afford some legal protection and offers a method of raising
capital via company stock.

[savvy1]

I just completed Incorporating for my company too. It was fairly simple to do.

As a Corporation you can have shares of stock issued (non-par value) during the initial formation of the company. We opted for stocks also.

Even as a Corp. you can still hire your associates and pay them not as "employees" but as Independent Contractors and they would need to file an I-1099 form with the IRS and would be responsible for paying their own state, city, & federal withholding taxes and social security as well.

After the Incorporation completes, you would get copies of the paperwork and then need to file for your TIN (tax id number) ...

Myself, I opted for Incorporation over LLC because of the type of business I'm in and have a partner with whom I am CO-CEO.