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Sole Proprietor vs LLC


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What's up tint pros, I have a question about running side work out of my house. If I purchase liability insurance would it limit my risk as a sole proprietor or would it still be advisable to form an LLC?

 

I've only been doing a few jobs here and there, but I'm considering ramping things up a bit. Thanks for your input!

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I'm no tax expert by any means and it's best to speak with an account but I started out about the same as you and was advised to do sole proprietor. I've been in business as that for roughly 8 years now with no issues. Will likely incorporate next year for tax benefits.

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As a sole proprietor, if your business bankrupts and your business is in debt you can get caught up with your personal assets. With LLC your personal assets are safe. Also, in my state when you recieve money from your company as a sole proprietorship you get taxed more percentage. Im not sure how much more but you get taxed almost 10% more. Make sure that you set yourself up as an S corp and not a C corp.

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If you get an LLC you have the option to file like a sole proprietor or corporation, if you're a one member LLC you can file your taxes like a sole proprietor meaning you list a schedule C showing how much you made less your expenses. Or you can opt to file like a schedule C, go to legalzoom.com they have a ton of info and you can call they can guide you and/or answer your questions because they want a sale.

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If you're going to set up as a corporation you must have your quarterly meeting minutes. This will be the first thing requested by an attorney in a lawsuit against you. You don't have the minutes it's called puncturing The Veil. Your Corp won't do anything to protect you.

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13 hours ago, Old timer said:

If you're going to set up as a corporation you must have your quarterly meeting minutes. This will be the first thing requested by an attorney in a lawsuit against you. You don't have the minutes it's called puncturing The Veil. Your Corp won't do anything to protect you.

"Piercing the corporate veil" is what my Lawyer called it. It's like they'll get you no matter what, I have very very few assets in my name, smart business ownership and asset self protection starts at home. My 2 cents on it.

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18 minutes ago, Tint Slayer said:

"Piercing the corporate veil" is what my Lawyer called it. It's like they'll get you no matter what, I have very very few assets in my name, smart business ownership and asset self protection starts at home. My 2 cents on it.

:yeah and also never mix personal expenses in with your business account. If you do get an audit and you have any personal expenses mixed, the burden of proof is on you to prove whats business and whats not. If your books are clean with only business stuff, the burden of proof falls on the IRS to prove they are not. Just like Tint Slayer, just what i was told by my accountant. 

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