I'm considering setting up an LLC next year for when I start my work at home job. Does anyone have any books/websites/etc. that helped setup their new business? Was there one book that stood out above the rest?
Thanks in advance for the suggestions.
What type of business are you looking to set up? Depending on the business, there are loads and loads of good resources. Let me know what sort of business so I can help further.
Simple work from home travel agent. I'll be working for a franchise, non W-2. I'm looking to possibly setup an LLC for tax and expense benefits - i.e. expenses to/from travel shows, health insurance premium deductions, etc.
I suggest you learn more about the tax aspect. Sometimes setting up an entity (LLC, corporation, non-profit, etc) can change your tax picture for the better or for the worse.
Nolo.com has some good articles on the legal aspect of LLCs.
Put LLC in search field and specify articles.
For a good overview of setting up a home business, Chris Guillebeau's book is good:
$100 Start Up
His Side Hustle book is good, too.
The tax aspect and the health insurance aspect are my two main reasons for looking at an LLC and I'm wanting to investigate them more before deciding between sole prop and LLC.
I appreciate the suggestions canarygirl, I'll definitely check them out.
This is a question for your accountant. A 20 minute conversation would probably give you the answers you are looking for. An LLC may make no sense at all, for example. I tell you as someone who made this mistake. I did it myself, set up an LLC, finally got an accountant and they had to change how we file, etc. Because I did it all wrong.
Congratulations on a new step up. Since it is a starting of your business you will have to face struggles to reach a top. A year ago, my brother started a new company but unfortunately lead into some financial crisis, at this moment of time Prestige Capital Corporation ( https://www.prestigecapital.com ) help his company by providing immediate cash flow and standing by him in his hard times. The Prestige Capital Corporation is a well-organized corporation which provides factoring services to small and mid-sized industries.
I just went through the same thing last year. I was lucky because according to my Accountant, I chose the correct company setup. I should have spoken to a CPA before I created the LLC but the good news is, you can make changes if it is not setup correctly. My advice is to speak with an accountant and they can guide you through the process. Some of them will do the filings for a fee or you can use a service like LegalZoom to file the forms and keep you legal. Good luck!
Thanks everyone for the advice. I had to pull the trigger and setup earlier than anticipated last November. I went with sole proprietor for now and may in the future "upgrade" to an LLC if the business is successful.
The revenue you make in your side hustle business will go on your schedule C. The LLC is not the business entity that will help you save on taxes, the S-Corp Corporation does. The entire net profit from your Schedule C will subject to FICA tax. Once your net profit from LLC reaches are about $50,000 in Gross Revenue and $30,000 net, it would be good idea to convert your LLC into an S-Corp by submitting 2553. The two greatest tax shelters available to us are operating as an S-Corp and owning rental real estate. The revenue that generate from your rental properties goes on your schedule E.
I appreciate you sharing that info. Business is going, but slowly, so I have a while to research my options before making the next big change.
Hi TravelGirl, I'm late to the party on this thread (I'm new to the FS forum) but I hope your business has been doing well the past few months. Having direct experience with this topic, here are a few other things you might want to keep in mind when it comes whether you remain a sole proprietorship or switch to an LLC:
- Liability Protections: One of the primary benefits of an LLC (that I didn't see mentioned above), is that it forces you to separate your business from your personal affairs. This shields you personally from legal or financial issues that arise with your business. For example, if your business gets fined, sued, or has outstanding debts it cannot pay, as an LLC your personal assets are largely protected. With sole proprietorships, there's no legal separation meaning business issues could put your personal assets at risk. For many, this reason alone can justify the additional cost and complexity of setting up an LLC.
- Costs, Time, and Complexity: While it's relatively inexpensive to start an LLC, it's still much more expensive, time-consuming, and complex than a sole proprietorship. With an LLC, there are registration costs and filing fees that you must pay to get started. Depending on the state, you are also likely to have "renewal" fees each year. As mentioned above, LLCs require that you keep your business and personal affairs separate. While that's great for legal reasons, it means separate bank accounts, financials, accounting, etc. These are expenses and time you must factor into the equation. Depending on the number of owners, you might also be required to provide additional paperwork such as creating an operating agreement and you might need to file business tax returns (even though LLCs are a pass-through entity).
- Location: If you decide to set up an LLC, the decision on where it's legally located should not be overlooked. Certain states are not as favorable as others when it comes to regulations, state taxes, local taxes, etc. DE is a popular choice by many for tax reasons but its value is typically exaggerated for most types of small businesses. While you do not need to reside in a certain state to set up your LLC there, you need to meet that state's criteria which varies by jurisdiction (e.g. registered agent address).
- S-Corp Election: Five years ago, I co-founded a software company. Originally, we set up the business as an LLC being taxed as a partnership. Once the business grew to a certain point, it made sense to change the tax election to an S-Corp (what RealWealthManagement referenced above). This allowed us to receive additional tax benefits based on our specific structure and financials. However, it's important to understand that the S-Corp tax election won't make sense for all businesses. Moreover, depending on your specific situation it might not actually save you money compared to other LLC tax options (or being a single-member LLC). Happy to provide additional details as to why if you are interested.
While I completely agree that consulting a reputable accountant is a good idea before forming your LLC, make sure you do your homework first to gauge if you're getting good advice for your specific business. Depending on your business, you may also want to consider consulting with a law firm that specializes in helping small businesses. We did this five years ago, and while it's certainly more expensive it saved us a ton of time/money in the long-run.
If you aren't concerned about the liability protection, you're probably safe to stay with the sole proprietorship until you grow the business to the point it makes economic and financial sense to start an LLC. Please let me know if you have any other questions about the process. Happy to help.