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Undecided - Sole Proprietor or LLC?


lise_pi

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Before I start selling my candles I want to establish my business - get a business license, tax id etc. Any suggestions whether to pick sole proprietor or Limited Liability Company (LLC)? I'm getting insurance too but with the sole proprietorship you're still liable with all your assets.

Just wanted to know what has worked for you?

Thanks!

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I was told if you make over 100K or have employees, you should inc or llc. Otherwise, it is not efficient. it costs a lot of money to start it up and if you are only doing this at a small level, you may go broke before even start. Each individual is different. Call your attorney or accountant.

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I would go to your local SBDC - Small Business Development Center. They are usually found at community colleges and you can look them up online to find the one closest to you. They will meet with you and help you decide what is right for you. To be honest, that is a personal decision that you need to make based on your current situation.

Here is the SBA page with a SBDC locator:

http://www.sba.gov/sbdc/

Here is a link from the SBA on starting a business and it also has a fairly good business structure page:

http://www.sba.gov/smallbusinessplanner/index.html

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I was told if you make over 100K or have employees, you should inc or llc. Otherwise, it is not efficient. it costs a lot of money to start it up and if you are only doing this at a small level, you may go broke before even start. Each individual is different. Call your attorney or accountant.

I sought legal advice by asking questions to attorneys. I filed myself but it would have cost double to file w/ an attorney. It's a lot more than a sole proprietor but it's definitely worth it in the long run.... If someone breaks out and accuses your company of the break out w/ an LLC your personal assets won't be touched only your company's.... It'd be great to be caught up in court and not have a place to live... :shocked2:

But do research before you decide. Another thing, regarding taxes. LLC's are looked at as sole proprietors when filing taxes if it's a "one member llc".... so that's a plus.

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I did some research on starting a LLC in VA. It looks like the total filing fee will be about $100-150 which is definitely worth it!

THanks for all the great replies and links!

To reply to the last comment - Insurance is definitely good too but I'm sure the insurance company has a cap limit too, right? So if you were sued and the plaintiff was granted more than this limit I think you would be liable (i.e. your personal assets)...I'm not sure about this but I would think that's how it works...

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i got the 1,000,000 dollar coverage but am thinking of uping it to 2,000,000. im registered as sole proprietor,but i dont sell over 100k either but i wish i did if it ever came to the day where i made over 50k doing this then i will think again about llc.

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I haven't seen anything about a 100K limit to establish yourself as a LLC. You can change from Sole Proprietor to LLC at any time I believe as long as you file all the right documents. Your state's website can help you out with the details.

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A LLC does not absolve you of all liability. You need to research that first. If you are proved negligent, you can still be held personally liable. This is a misconception about the LLC that most people believe. You cannot do anything in the US and be totally absolved of liability. It does provide an "umbrella" of protection, but it can be broken in some cases. The appropriate course of action would to contact an attorney, make sure you review what the law is in your state (each state varies) and make sure you have insurance. LLC is not a insurance policy by any means.

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Di_AZ... Yes, you are liable either way, but I was referring the freezing of personal assets .. you still can live your life day to day while going through court precedings.. of course if you are held responsible and you don't pay up... you better plan on loosing everything you own....

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thats why you always have to list everything you put in your products. If you miss 1 tiny little additive that is what that person would be allergic to. i put it this way if people get it in their head that they want to sue you they are going to.

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