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LLC or Sole Proprietorship

Discussion in 'Jobs & Careers' started by excorcist, Nov 20, 2017.

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LLC or Sole Proprietorship

  1. LLC

    9 vote(s)
    75.0%
  2. Sole Proprietorship

    3 vote(s)
    25.0%
  1. Nov 20, 2017 at 5:49 PM
    #1
    excorcist

    excorcist [OP] Well-Known Member

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    Ill try to keep this short.

    After building motorcycles for the last several years as a hobby that paid my bills (and not having any luck finding a good job with my marketing major), I have decided it is time to get serious and license it as a business.

    I know the difference between a sole proprietorship and an LLC, and I know I am ultimately the one who will have to decide what is best for ME but I have gotten so much useful help here at TW and have come to really respect the cumulative knowledge here that thought I would ask for opinions.

    The two main sources of revenue are from two activities:

    1. I buy used (mainly Ducati and BMW) motorcycles from the 1970s-contemporary) and restore / and or customize them depending on estimated value, then re-sell them.

    2. I buy any rare motorcycles if the price is decent and bring them to larger and/ or more specific markets to bring a higher resale price.


    I am planning on licensing this as a "home based business" ... one of the things I was wondering about is would my home then become an asset of the business if I were to choose LLC and become vulnerable in a lawsuit against the LLC?

    I am leaning towards LLC because obviously motorcycles have an inherent ability to hurt people, although I do not foresee any issues I would not want to risk my life savings in any case.

    IS good liability insurance for a sole proprietor just as good as an LLC for protecting owner?

    As a single owner LLC in NV this would be considered as a "disregarded entity" still not 100% sure exactly what the implications of that are.

    Is there an obvious answer to this for this type of business or no?
     
    Last edited: Nov 20, 2017
  2. Nov 20, 2017 at 6:03 PM
    #2
    JoefromPTC

    JoefromPTC Well-Known Member

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    Joe
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    Don't base your decision on a poll of TW users... You need to consult with an attorney who specializes is small businesses. Pay for expert advice, you won't be sorry. Huge tax differences too. If you're lucky, Trump's tax plan will pass the Senate, lowering your effective tax rate substantially! Good luck!
     
    medic2230, KB Voodoo and cosmicfires like this.
  3. Nov 20, 2017 at 6:16 PM
    #3
    crisanalex

    crisanalex Well-Known Member

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    Lol, I am currently working on starting a buisness I'm still in my infancy stage of things. I'm also working on getting a degree in marketing (might have to reconsider now lol) definitely should take everything people say here with a grain of salt. Best of luck with your future business ventures.
     
    excorcist[OP] likes this.
  4. Nov 20, 2017 at 6:20 PM
    #4
    Sub_Par

    Sub_Par Well-Known Member

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    Tax wise they are identical, unless you’re going to have partners in this as well. It’s a Limited Liabilty Company not a corporation. What it does is take the liability off of you and put it on the company. So someone sues you and they don’t get to take your house.
     
    excorcist[OP], tcBob and Roland79 like this.
  5. Nov 20, 2017 at 6:27 PM
    #5
    excorcist

    excorcist [OP] Well-Known Member

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    Should have been more clear in original post i am NOT going to make a decision solely based on people I dont know's opinions.. just looking to get as much info as I can before making a decision.
     
  6. Nov 20, 2017 at 6:29 PM
    #6
    gthupman

    gthupman Well-Known Member

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    When starting a business there are three ESSENTIAL things that must happen

    1 identify a need and a market for your product or service
    (Sounds like you have this base covered)

    2 hire a lawyer

    3 hire an accountant

    2&3 will answer all the questions you have and point you in the right direction

    As far as 2&3 go...don’t skimp out...hire the best you can afford and thank yourself later
    Do not pass go, do not collect 200$..start here and do it right
     
    JoefromPTC and excorcist[OP] like this.
  7. Nov 20, 2017 at 6:31 PM
    #7
    Sub_Par

    Sub_Par Well-Known Member

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    What is it your looking to accomplish? Are you looking to just get the liabilty off of you and your property or are you looking for the best scenario tax wise? Or maybe both?
     
  8. Nov 20, 2017 at 7:00 PM
    #8
    excorcist

    excorcist [OP] Well-Known Member

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    My understanding is that tax wise a single owner llc and sole proprietorship are the same or almost the same (both considered pass through taxation if I recall).. mainly asking for liability reasons and other benefits/ downfalls
     
    Last edited: Nov 20, 2017
  9. Nov 20, 2017 at 7:05 PM
    #9
    foxrcing07

    foxrcing07 KO7FOX

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    LLC or S-Corp
    S-Corp has similar pass thru tax responsibility to a sole proprietor, but has extra protections built in
     
    excorcist[OP] likes this.
  10. Nov 20, 2017 at 7:10 PM
    #10
    excorcist

    excorcist [OP] Well-Known Member

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    I will consider it most definitely. Being that it's a pretty unique business model I was thinking hiring a lawyer could get pricey as they would have to do research as they probably wouldn't have a canned answer like they may for a clothing retail store or the like.

    I have a few friends who own their own business and are successful, and as far as I know none of them Have a designated lawyer or accountant, but I am not opposed if it is absolutely necessary
     
    Last edited: Nov 20, 2017
  11. Nov 20, 2017 at 7:16 PM
    #11
    excorcist

    excorcist [OP] Well-Known Member

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    I'll have to look more into this. Thank you
     
  12. Nov 20, 2017 at 7:28 PM
    #12
    Catcrazed

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    My understanding is you list your personal and business stuff in an Llc and everything you have listed as personal is protected.
    I did an in person consult with a lawyer because I was thinking about forming and llc for my rental house. I can't remember exactly what he said but basically he said that in that instance to just insurance up and I didn't have enough to protect to form an llc he didn't really need to understand the actual business in my case to advise me.
    We spent about an hr together and charged me $150
     
    gthupman and excorcist[OP] like this.
  13. Nov 20, 2017 at 7:34 PM
    #13
    DanoDavis

    DanoDavis Alright meow

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    I run an HVAC business from my home.
    I went the single-member LLC route to protect myself, and Home, were something major to happen.
    (Single member LLC may not be available in your state, check.)
     
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  14. Nov 20, 2017 at 7:44 PM
    #14
    Sub_Par

    Sub_Par Well-Known Member

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    An LLC is basically an S Corp and can even be taxed as one (pass through income). You can file form 8832 with the IRS to be treated as an S Corp or even C Corp. If you stay as a sole proprietor or LLC (not taxed as an S Corp) then you will pay income taxes based on your tax rate, plus ~15% for Self Employment taxes. If you decide to be taxed as an S Corp then it you would only be taxed at your tax rate because you will receive a K1 for whatever amount you pay yourself from the Corp. Things can get very complicated and most people will hire a lawyer; however, you don’t have to. You can also hire an accountant but if you can keep your own books you don’t need to until the end of the year for your taxes to be done. You can file all paperwork online through sites like legal zoom.
     
  15. Nov 20, 2017 at 7:46 PM
    #15
    Sub_Par

    Sub_Par Well-Known Member

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    Luckily you also don’t have state tax, which is a huge benefit when being self employed.
     
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  16. Nov 20, 2017 at 7:54 PM
    #16
    excorcist

    excorcist [OP] Well-Known Member

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    Thank you Steve, its answers like this that will lead me in he right direction while doing my research.
     
  17. Nov 20, 2017 at 7:58 PM
    #17
    Sub_Par

    Sub_Par Well-Known Member

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    No problem, getting started with a new business can be confusing. I probably should have mentioned it but I’m an accountant. I run my own business and primarily do income taxes (regular 1040 but also corporations, partnerships and estates or trusts), but I also have clients that have me “do the books” as they like to say. And a little more background, I’ve been in business since 2005, before that my grandmother ran the business for 40+ years (I had to finish school before taking things over).
     
  18. Nov 20, 2017 at 7:59 PM
    #18
    Speedytech7

    Speedytech7 Toyota Cult Ombudsman

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    Except in some cases they still can, it isn't 100% safety. But I'd probably lean toward LLC as well. As always speak with a trusted lawyer and CPA before making your decision, an of course your chosen banker.
     
  19. Nov 20, 2017 at 8:02 PM
    #19
    Sub_Par

    Sub_Par Well-Known Member

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    Oh absolutely this can happen, a judge can allow the owner of an LLC to be the responsible party. This is rare and generally only happens in fraud case, or if the owner was doing something illegal and tried to hide behind the LLC.
     
  20. Nov 20, 2017 at 8:11 PM
    #20
    excorcist

    excorcist [OP] Well-Known Member

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    Curious why to speak with a banker before licensing business?
     
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