Hi,
I’m working on my business plan to launch a small online business (baby related special occassions/event planning). I’m a stay at home mom. I’m torn between the legal structure I would need to form. At what point do I really consider a Limited Liability vs. a Sole Proprietorship?
That it is really tough question to answer… As has been mentioned, there are a lot of issues that need to be carefully considered based on the state where you live, and the state where you intend to do business in. If you are in NJ, for example, the minimum corporate tax is $500/year. NY is only $100… That would make a huge difference to a small at home business, if your profits were say only $10,000 – look at the difference in tax coming out!
Your accountant would be the best person to discuss your legal organization with – whether you want to incorporate (be it a Corp or an LLC) or if you should remain as a sole proprietor.
For the remainder of this year though, you may consider just operating as a sole proprietor – there is only one more quarter of the year, and if you want to keep your books as simple as possible, keep your business and personal "tax years" on a Jan – Dec year.
Just my 2 cents!
J
We cant make that decision for you. Have you tried your state’s website and search for new business, entrepreneurship, business taxes etc. They sometimes have guidelines for you. You may start out as sole-prop and as you grow, consider incorporating.
References :
There are tax implications based on how you form your business. I chose to file as a subchaper S because stock dividends, which I’m allowed to pay myself, are taxed at a lower rate than normal income and are sheltered from self employment tax.
You should talk to a good tax accountant to help guide you through this decision. Ask local business people that you may be friendly with for a good recommendation of a competent and thorough tax accountant but still be prepared to ask a lot of questions.
Good luck with your busines!
References :
That it is really tough question to answer… As has been mentioned, there are a lot of issues that need to be carefully considered based on the state where you live, and the state where you intend to do business in. If you are in NJ, for example, the minimum corporate tax is $500/year. NY is only $100… That would make a huge difference to a small at home business, if your profits were say only $10,000 – look at the difference in tax coming out!
Your accountant would be the best person to discuss your legal organization with – whether you want to incorporate (be it a Corp or an LLC) or if you should remain as a sole proprietor.
For the remainder of this year though, you may consider just operating as a sole proprietor – there is only one more quarter of the year, and if you want to keep your books as simple as possible, keep your business and personal "tax years" on a Jan – Dec year.
Just my 2 cents!
J
References :
Since you are just starting, and for now it is a small online business, begin with a sole prorpriety and add it in to your business plan for a LL at some point in the future. (Unless you have taken on partners already) Go to your local Department of Revenue (or online) and fill out the paper work and get your license. They will help you with all your questions, including taxes for city and state, they will also explain the differences between LL and SP and what is right for you at this time. You can fill out the paperwork on line, but it will take about 4-6 weeks to get it back, if you can go to a local Dept.of Rev. it is instant once you fill out the form and pay for the license.
References :