Can you hire an employee and still be a Sole Proprietor, or are you forced to Incorporate at that point?

Thanks!

You can hire as many as you want to and still be a sole prop. However I would not recomend staying a sole prop as you will not have the same asset protection as you have with the several forms of incorporation.

Thanks, mac.

I understand that since I am married and my assets are jointly held, I am protected from lawsuits.
I want to stay as a sole as long as possible to minimize paperwork, and in case I decide that self-empoyment isn't for me.

I appreciate your input and anybody else's at this point in my "business life".

Talk to your lawyer! I don't think jointly held property is protected. If assets are in your spouse's name only they may be protected.

Dave

I understand that since I am married and my assets are jointly held, I am protected from lawsuits.

Man do you need to talk to a lawyer! Do it fast.

-Hal

Being incorporated doesn’t provide 100% protection. If legal action is only taken against the corporation your personal assets are safe but usually action will be taken against the corporation and the owner(s) of the corporation. I know several contractors that are incorporated and have been involved in litigation and they had to layers to defend both the corporation and their personal assets. If the owners of the corporation had not control or knowledge of the action initiating the legal action their personal assets will probably be safe but if they were directly involved their assets are fair game. Many of the contractors I know have incorporated for tax benefits.

Curt

I guess I should not have said "protected from lawsuits", but it was a lawyer who told me that jointly held assets cannot be taken.
I am inclined to go LLC, anyhow, but I've been putting it off.

[This message has been edited by Redsy (edited 09-10-2005).]

In California incorporation offers little liability protection for the small guy.

California does not permit LLC as a legal form for contractors.

If you need to protect your assets from lawsuits the only viable method is to purchase insurance. When properly insured, a small operator's assets are rendered too small to pursue. Attorneys sue to get buckets of cash from insurance carriers. They don't normally waste their time trying to seize 'business assets' that are commonly just the tools of a man for hire. Any cash or credit the tradesman ever had will have been spent defending himself against the suit.

For the small shop even the tax advantages are choked down to nothing. When you back out the extra paperwork, extra layers of taxation,legal expenses, meeting rituals -- without documented meetings your corporation dies at trial -- corporate form just does not pay off.
This changes when a contractor gets big enough to have juicy liquid assets and runs his operation from an office. At that point, incorporation may have merit.
Unmentioned, but very common, is an incorporation designed to pass the company on to the next generation. This is by far the best reason to incorporate. It is in this way -- in almost all jurisdictions -- that a founder can stage the transfer of ownership without paying killer taxes all at once. It also permits the heirs to get a contractors license in their own names ( in California )by just being active in the management of the corporation over a period of five years, IIRC. No test, no time in the trade. The kid could be going to college.

A good accountant will tell you the upside to each one, as well as the downside to each one.

You need a "blanket" of protection for your personal assests.


Dnk....

Telsa -

"California does not permit LLC as a legal form for contractors."

Where did you read/hear/told this?

I thought an LLC was legal for contractors (not having looked into it though).

Steve

California states that LLC is not accepted on their application form and elsewhere.

The essential thrust of an LLC is to shield owners from liability. That is exactly against the public policy of the License Board. The Board wants contractors to purchase insurance and consistently moves to block any legal strategem that would frustrate injured parties.