Hillary Posted June 26, 2006 Share Posted June 26, 2006 I've done a search and I know it's come up before but I can't find what I'm looking for. I just applied for my Fed tax I.D. # and on the app I filled in 'sole proprietor'. Now I'm nervous that I'll get my pants sued off for some ridiculous thing and maybe I should have put 'LLC'. I know an LLC is supposed to be a bit safer somehow as far as keeping personal assets safe, but sole proprietor just sounded nice to me....lol, and it is cheaper. So I wondered if you all could calm me down here. Has anyone really been sued over a candle and lost thier home?:undecided I mean I know it's possible, but is it one of those things that happened to a friend of a friend of a friend? I just don't know if I should be as concerned over the difference between LLC and sole propietor. Quote Link to comment Share on other sites More sharing options...
Mona Posted June 26, 2006 Share Posted June 26, 2006 You can't become an LLC just by putting on the tax ID application. You have to file documents to become one. Right now you're a sole proprietor.http://www.sba.gov/starting_business/legal/forms.html Quote Link to comment Share on other sites More sharing options...
The_Dallas_Texas_Dean Posted June 26, 2006 Share Posted June 26, 2006 Not sure if it will help you make your decision, but after a "meeting of the minds" with my CPA and Attorney, together we decided that the best route for me, just starting out with my Candle business, is an S Corp.I went into the meeting convinced that an LLC was the route to go however they changed my mind and were both in agreement.Sometimes you have to trust those that know more about these things...or at least I do. I did like the fact that it will give me some relief on my personal taxes with the advantage of the corporation being a separate entity. Quote Link to comment Share on other sites More sharing options...
Hillary Posted June 26, 2006 Author Share Posted June 26, 2006 Thanks for the link, I do have the paper work. I have all the forms to register the business and get my vendors license and just happened to start with the tax I.D. and that was on the form. I've never need a CPA before but maybe that will be something else to consider. I just thought I might get a better perspective after hearing from the experienced business owners. To be honest attorney fee's are just not in the budget right now. But that would definitly be the way to go. Quote Link to comment Share on other sites More sharing options...
islandgirl Posted June 26, 2006 Share Posted June 26, 2006 Here is a thread that might help with the LLC, S-Corps, Sole prop... HTHhttp://www.smallbusinessforums.org/modules.php?name=Forums&file=viewtopic&t=135ETS-This is a great forum for tax and business questions...http://www.smallbusinessforums.org/index.php Quote Link to comment Share on other sites More sharing options...
Candlewitch Posted June 26, 2006 Share Posted June 26, 2006 What ever keeps you from being sued. Not sure on the s-corp. Quote Link to comment Share on other sites More sharing options...
Candybee Posted June 26, 2006 Share Posted June 26, 2006 HillaryYou may want to contact the SBA and find your local SBA office or affiliate. I have been taking dirt cheap business courses at a local college thru my local SBA.So far I have had classes in taxes and licensing, setting up your account books, and the business entities course that explains the differences; pros and cons, of LLCs, Sole Proprietor, regular and S Corp, parnerships, and more. They have more courses that I plan to take including a two day workshop in quickbooks that is much cheaper than taking a commercial course.Its helped me a lot. I'll bet you have one close by-- if you have trouble also try contacting your local Chamber of Commerce. Quote Link to comment Share on other sites More sharing options...
Noodle Posted June 27, 2006 Share Posted June 27, 2006 I am in a joint partnership with insurance. LLC is too much of a headache at times. However, I do not sell candles, so that makes things easier for me. Quote Link to comment Share on other sites More sharing options...
cas Posted June 27, 2006 Share Posted June 27, 2006 The biggest benefit of an LLC is that it protects your personal assets in the event of a lawsuit. Your business would be liable, but the suit can't go after your personal assets. Quote Link to comment Share on other sites More sharing options...
Hillary Posted June 27, 2006 Author Share Posted June 27, 2006 The biggest benefit of an LLC is that it protects your personal assets in the event of a lawsuit. Your business would be liable, but the suit can't go after your personal assets.Thanks- That's the part I do get. I was just wanting to know if many others work from home and feel comfortable with working as a sole proprietor. I'm just curious as to how people set up. Quote Link to comment Share on other sites More sharing options...
dixiegal Posted June 27, 2006 Share Posted June 27, 2006 LLC will protect your business if you are being sued but they can still go after your personal property. Also you will need a business account that is used for nothing else,and you will have more paperwork.You will also have to pay yourself a salary, big pain in the fanny IMO we checked into it for oour painting company and both our attorny and accountant told us we would be no better off with it Quote Link to comment Share on other sites More sharing options...
dixiegal Posted June 27, 2006 Share Posted June 27, 2006 The biggest benefit of an LLC is that it protects your personal assets in the event of a lawsuit. Your business would be liable, but the suit can't go after your personal assets. my accountant told me this was the biggest misconception with llc, if you don't have enough insurance to cover the lawsuit they can still get you, both he and my attorney said they love to have people get this, because of the money made by setting it up and fees they get for helping businesses maintain all the paper work. Quote Link to comment Share on other sites More sharing options...
RobinInOR Posted June 27, 2006 Share Posted June 27, 2006 You have to be careful with *all* business structures. If it comes to the worst case and you're in a pickle, lawyers can even try to "pierce the corporate veil" (same with LLC). You've *got* to keep everything separate - bank accounts, etc. Otherwise, as a single owner of anything, they'll still say you are responsible for negligence and come after your personal stuff.Luckily in OR a LLC is only $50/year, all you do is mail in your name/address - no attorney needed as long as you aren't doing it as a multi member LLC.I've never run across anyone that has been sued. Quote Link to comment Share on other sites More sharing options...
pinetreecandles Posted June 27, 2006 Share Posted June 27, 2006 My Brother-in-law is a Corporate attorney. He said, unless your business is includes a brick and mortar store and you have a physical location in more than one state, there is no reason to incorporate. Get insurance The most you can afford), keep separate accounts, test your candles throughly, and make sure they all carry the warning labels.If someone tries to sue, the burden of proof lies with them. They must prove it was a defect in your candle that caused the problem. No easy task and very costly for them.HTH. Quote Link to comment Share on other sites More sharing options...
Hillary Posted June 27, 2006 Author Share Posted June 27, 2006 Luckily in OR a LLC is only $50/year, all you do is mail in your name/address - no attorney needed as long as you aren't doing it as a multi member LLC.I've never run across anyone that has been sued.Robin- Here it is $150 for the LLC and $50 for sole Proprietor, that is if I read the forms right.:undecided I'm feeling better about all this. Thanks everyone for all the input. Maybe I'm not getting in over my head. Quote Link to comment Share on other sites More sharing options...
cas Posted June 27, 2006 Share Posted June 27, 2006 Dixie, I've not heard of the insurnace coverage aspect, and I had an accountant, attorney, and actuary in the meeting. I will ask them next time I call. Quote Link to comment Share on other sites More sharing options...
AngelaVA Posted June 27, 2006 Share Posted June 27, 2006 The biggest benefit of an LLC is that it protects your personal assets in the event of a lawsuit. Your business would be liable, but the suit can't go after your personal assets.This is true only if you are a true corporate entity. If there is any reason to do it, a court can pierce the corporate veil and hold you personally liable. An LLC or S Corp is absolutely better for most people than a sole proprietorship or a partnership (general partners are personally liable for all debts and obligations of the partnership). I would meet with an experienced business attorney and decide what to do. It's worth the money. An attorney will be able to tell you all the little things that need to be done to make sure that your business is kept separate and distinct from your personal assets. A good attorney/law firm will also keep your corporate records and minutes up to date and be your registered agent as well. Like I said, it is definitely worth the money.Also, not being properly insured while running a dangerous business can be grounds for holding you personally liable. Just something to keep in mind. Quote Link to comment Share on other sites More sharing options...
cas Posted June 27, 2006 Share Posted June 27, 2006 This is true only if you are a true corporate entity. If there is any reason to do it, a court can pierce the corporate veil and hold you personally liable. An LLC or S Corp is absolutely better for most people than a sole proprietorship or a partnership (general partners are personally liable for all debts and obligations of the partnership). I would meet with an experienced business attorney and decide what to do. It's worth the money. An attorney will be able to tell you all the little things that need to be done to make sure that your business is kept separate and distinct from your personal assets. A good attorney/law firm will also keep your corporate records and minutes up to date and be your registered agent as well. Like I said, it is definitely worth the money.Also, not being properly insured while running a dangerous business can be grounds for holding you personally liable. Just something to keep in mind.I was going off what my accountant and attorney said... they are the ones with all the experience with setting up umbrella companies that are protected. That's why I went with the LLC and did all the paperwork and had all the legal docs drawn up. They say I'm protected because biz is seperate from personal. That was THE requirement for setting up shop. My insurance agent was made aware of this as well. Quote Link to comment Share on other sites More sharing options...
AngelaVA Posted June 27, 2006 Share Posted June 27, 2006 I was going off what my accountant and attorney said... they are the ones with all the experience with setting up umbrella companies that are protected. That's why I went with the LLC and did all the paperwork and had all the legal docs drawn up. They say I'm protected because biz is seperate from personal. That was THE requirement for setting up shop. My insurance agent was made aware of this as well. I have helped set up many of these kinds of business too (I'm an attorney in a large law firm). Having the biz separate is the requirement. However, the requirements as to what you have to do to remain separate vary from state to state and the level of protection you recieve depends on your actions as a business. Things like having the proper, but not required, formation documents, a separate business account, corporate records, corporate meeting minutes and adequate insurance are some of those factors. Just filing for an LLC will not protect you absolutely. Those corporate formalities have to be present or else that LLC is just an alter ego for you personally and you won't be able to escape personal liability in that case. I'm not saying that your attorney is wrong - just that people here need to understand that simply filing for an LLC and paying the $100 filing fee is not enough. There is much more to it than that, if you you want your personal assets to be protected. I didn't mean for there to be a misunderstanding Quote Link to comment Share on other sites More sharing options...
cas Posted June 27, 2006 Share Posted June 27, 2006 I have helped set up many of these kinds of business too (I'm an attorney in a large law firm). Having the biz separate is the requirement. However, the requirements as to what you have to do to remain separate vary from state to state and the level of protection you recieve depends on your actions as a business. Things like having the proper, but not required, formation documents, a separate business account, corporate records, corporate meeting minutes and adequate insurance are some of those factors. Just filing for an LLC will not protect you absolutely. Those corporate formalities have to be present or else that LLC is just an alter ego for you personally and you won't be able to escape personal liability in that case. I'm not saying that your attorney is wrong - just that people here need to understand that simply filing for an LLC and paying the $100 filing fee is not enough. There is much more to it than that, if you you want your personal assets to be protected. I didn't mean for there to be a misunderstanding Agreed. I didn't mean to imply that paying the $100 was enough. I WISH mine only cost $100. I nearly fainted when I got the bills from both the accountant and the lawyer. Makes me wish I would've chosen a more lucrative profession.But yes, the seperate bank accounts, legal docs, federal id #... it's all part of it, and better left to someone who is qualified to set up! I have a hard enough time keeping up with the day to day ops on MY end without worrying about the legal stuff... that what you guys are for. Quote Link to comment Share on other sites More sharing options...
pinetreecandles Posted June 27, 2006 Share Posted June 27, 2006 Now days if someone thinks they can make easy dollar off someone they will do it and there are always lawyers who are more than willing to help. No offense AngelaVA . No matter what you sell, your always liable for something. What you have to decide is how much risk your willing to take on someone not coming after you. I don't know the statistics of how many people have faced lawsuits over a defective candle, but I couldn't find any in my area. AngelaVA may be able to shed more light on that.Insurance though is a must no matter how you decide to go. Quote Link to comment Share on other sites More sharing options...
Hillary Posted June 27, 2006 Author Share Posted June 27, 2006 Yes, I see that insurance will be a must. Hate to admit it, but I'm no risk taker. I am diligent about record keeping and organization though. I think it would have to be one messed up candle and someone with too much time and money on their hands that would actually bring on a lawsuit. But you just never know. Better safe than sorry. Quote Link to comment Share on other sites More sharing options...
AngelaVA Posted June 27, 2006 Share Posted June 27, 2006 I haven't found any cases of someone being sued over a handmade candle. Not one. But many suits are not published, so this shouldn't be information used to make a major decision. Bottom line though, having insurance will show a court that you mean to properly capitalize your business. Undercapitalization is one reason for the court to allow someone to come after you personally. So, it's a good idea to have insurance for more than one reason. Also, if someone were to sue you, the atty fees alone would be more than most of us could bear. Lawyers ain't cheap, lol, and neither are lawsuits. Even if you win, you will still have to pay your lawyer. Quote Link to comment Share on other sites More sharing options...
pinetreecandles Posted June 27, 2006 Share Posted June 27, 2006 Thanks for the info AngelaVA, it's much appreciated :highfive: Quote Link to comment Share on other sites More sharing options...
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