Comments on: Incorporating Your Business: Sole Proprietorship, LLC, or Corporation

By: Soccer9040

Soccer9040 — Fri, 13 Nov 2009 13:50:50 +0000

I have a small company I started in college as a sole proprietorship. Well we rolled it up to an LLC and it was great for a few years. Now that I am out of college I dont have as much time to devote to the business, but we still keep it running. Now its just a pain in the butt during tax time. Yes the LLC was worth it then, but its too much for the little business now.

I should just shut down the LLC and start running as a sole proprietor again.

By: paul

paul — Sat, 11 Apr 2009 15:19:53 +0000

I am a self employed medical professional and contract my work exclusively in AK. I am presently INC.in WA state, which was easy at the time I was living in WA, but have recently moved my residence to GA. What may be the best move as I go forward, in terms of LLC etc ?

By: Jim

Jim — Wed, 01 Apr 2009 15:18:40 +0000

There’s no income threshold for becoming an S-Corp and I don’t think Social Security withholding will change with the corporation type, but check with an accountant in your state.

By: David Sobieski

David Sobieski — Wed, 01 Apr 2009 15:10:25 +0000

My wife and I have or are a small mom and pop sewing shop in northern Minnesota. I’m having a hard time wrapping my mind around S-Corp versus what we are… a small sole source proprietorship. Is there an income threshold for becoming an S-Corp. We just got killed this year with Social Security withholding.

By: Randy

Randy — Sun, 01 Mar 2009 15:30:10 +0000

My partner and myself operated a rental property as a partnership, but last year we incorporated an LLC in June. Should we the LLC taxes include all the year or should they be seperated?

By: Rich W

Rich W — Mon, 23 Feb 2009 15:31:31 +0000

The information on the SEP is incorrect. SEP means “Simplified Employee Pension”, not “Self Employed”, and yes, it is an option for an S-corporation owner. The owner makes contributions for all employees, and since the owner is also an employee, it’s allowed. Take the time to read the IRS publication on retirement plans.

By: mapgirl

mapgirl — Wed, 18 Feb 2009 21:54:14 +0000

Jim,

My family went through turning their sole proprietorship over to an S Corp a few years ago. As we drew up shares and whatnot, my parents asked if I wanted shares and ownership responsibilities. I said no because my sibling was not participating and I was worried it would start making things messy for my personal taxes by having ownership of a corporate entity out of state, etc. as well as potential estate planning issues later. (sibling feeling left out, etc.)

I know one reason why my folks did this was because my father was a sole proprietor, but by transferring assets like this, my mother would be able to hang on to their business more easily as an owner of the S Corp, vs an inheritor of the sole proprietorship.

Now I know you and your wife are still quite young, but was anything like this a concern of yours?

By: Aliefdfuffey

Aliefdfuffey — Sun, 15 Feb 2009 16:03:07 +0000

There is an election to have health insurance come out of gross wages instead of net wages. Their is an election that you have to file with the IRS. Ask a CPA and a health care provider about this.

By: Aliefdfuffey

Aliefdfuffey — Sun, 15 Feb 2009 15:57:53 +0000

an S Corporation is the best business vehicle for anyone that does not mind the filing forms and having a CPA. The best part about the S Corp is your salary is set up like any other business which reasonable is around 30K-60K a year depended on the field. The other income to the business can be paid in distributions which would not have FICA that on it saving 15.3% there. Then you can capitalize your fixed goods which most are available to a Section 179 election up to $108K direct reduction in basis. Plus depending on the nature of your business if you have a lot of advertising promotions which might include some meals and entertainment, these can be reduced at 100% instead of the 50% tax rule on meals and entertainment.

By: Patrick

Patrick — Fri, 13 Feb 2009 17:46:31 +0000

ooops! I haven’t really looked into forming an S corp, so I wasn’t aware. Still, avoiding the self employment tax is nice.

By: saladdin

saladdin — Fri, 13 Feb 2009 00:45:12 +0000

No.

saladdin

By: JR Moreau

JR Moreau — Thu, 12 Feb 2009 21:17:34 +0000

Can you revert from a LLC to a Sole Proprietorship? I got a tax ID in December for my startup consultancy. I didn’t make any money so filing seemed simple, but it seems quite complicated for what I’m looking to do with my business at the moment. I’m wishing I filed as a SP in the first place.

By: Jim

Jim — Thu, 12 Feb 2009 18:47:37 +0000

Excellent point, I didn’t mention it because I didn’t know! (but I don’t have any passive income either, so that’s probably why my accountant didn’t mention it either)

By: My Journey

My Journey — Thu, 12 Feb 2009 18:45:13 +0000

Not mentioned here, is that it is relatively easy to lose S-Corp Status causing a HUGE headache for your advisors (tax, legal or financial). One simple example is having more than 25% in passive income (i.e. rental property).

By: Jim

Jim — Thu, 12 Feb 2009 15:39:34 +0000

For me, I think it makes sense as soon as possible to reduce personal liability.

I think you want an LLC with two people because you don’t want to be personally liable for what the other person does.