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Question for the business owners... #41923 09/11/04 09:23 AM
Joined: Jan 2003
Posts: 45
M
MONOLITH Offline OP
Member
Hello all.

I'm in the early stages of incorporating and requesting my EIN #. I'm looking for some advice from the experienced...

In our specific business, did you find it better to be an S type corporation or a C type?

Or does the specific circumstances of our particular business not really matter, and the election type based more on the size (ie: finances) of your company?

I have done mind-numbing research with information available to small businesses in general, but was wondering what people in our specific industry found to be better.

Thanks.

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Re: Question for the business owners... #41924 09/11/04 01:42 PM
Joined: Feb 2002
Posts: 375
G
George Offline
Member
You should see your tax advisor. Small differences in your behavior may make large differences in your tax situation.

Re: Question for the business owners... #41925 09/11/04 02:02 PM
Joined: Jan 2003
Posts: 45
M
MONOLITH Offline OP
Member
Yeah,agreed. I'm actually involved in lengthy conversations with CPAs at other websites. I'm getting a fast and hard crash course in corporate taxes, and my brain is seizing up. [Linked Image]

I was just curious if there was a trend related to our specific industry, and why.

Perhaps those that deal mostly with the low expense/high profit angle of home repair type jobs tend to file one way, while those in the new construction end, which tends to be more upfront costly/lower profit margin might have a different strategy.

Perhaps those sort of things don't even come into play, and the decisions are based solely on actual dollar amounts/tax brackets.

As a new business owner, I'm just curious as to how others went when they first started up. I have a feeling the conscensus will be the S type, at least during the first year or so.

Thanks for any replys.



[This message has been edited by MONOLITH (edited 09-11-2004).]

Re: Question for the business owners... #41926 09/11/04 02:34 PM
Joined: Feb 2003
Posts: 687
A
Active 1 Offline
Member
You did not mention a propritorship. That is my route. If you get biger you can chang your status later. In IL to have a corporation you need to have a leagal representitive listed with the secritary of state every year. Of course their is a charge for this from your attorny. Just like all the corp minuits, share holder meetings, and other papers your attorny can do for you.

I think corps are over rated. They cost more to get started around here. You may be told that the you are not liable for money due but the corp is. I don't believe it is true when it comes to the IRS. A lot of suppliers will want a personl garentee the money will be paid by the owner. That defetes the one selling point of a corp.

Corporations are taxed and then you are taxed on what you put in your pocket. Double taxation on income. You need to have 2 seperate taxes done. One for you and one for the corp.

In case of wrong doing corps are sued instead of the owner. It can take the liability off you personaly. I can't say if can keep a customer from filling a suit against a corp and the emploiee(s) personaly involved. I would say in todays world you can sue anyone for anything. If a corp gos to court here an attorny must represent them.

Like the others said talk to the account and ask some questions. In my oppinion corps are good for attornies and accountants but geared for the very small and honest business.

Tom

Re: Question for the business owners... #41927 09/11/04 06:45 PM
Joined: Jan 2003
Posts: 45
M
MONOLITH Offline OP
Member
My becoming incorporated is a forgone conclusion. My papers will be back from the state any minute.

I think there are benefits to becoming an official corporation, be it personal legal protection, taxation strategies, or how you appear to potential clients, particularly when moving beyond household repairs and into the arena of construction contracting.

I think anyone who desires to become more than a guy in a van with a ficticious name would eventually have to go this route.

The initial learning curve can be slightly daunting, but with a little dedication to the cause one quickly realizes that attorneys are not needed for neither incorporating, nor organizational duties such as board meeting minutes, company by-laws, stock handling, etc. (unless it's mandated by your state, as you mentioned).

There is an enormous amount of educational materials available in book stores, and online, to allow even the most inexperienced 'ceo' to be up and running in no time.

I think remaining a sole proprietorship would limit the things I see myself doing in the near future.



[This message has been edited by MONOLITH (edited 09-11-2004).]

Re: Question for the business owners... #41928 09/11/04 08:09 PM
Joined: Dec 2003
Posts: 886
H
hbiss Offline
Member
Instead of spending hours on the 'net and in book stores I suggest you spend $100 or so and talk to an accountant about your own circumstances and where you wish to go.

If a homeowner comes here and asks questions about wiring their house the advice would be to hire a professional. I'm giving you the same advice. You can read and research all you want but in the end there is no substitute for a formal education and experience.

-Hal

Re: Question for the business owners... #41929 09/12/04 12:36 PM
Joined: Jun 2003
Posts: 1,143
D
DougW Offline
Member
Proprietor & Sole Employee here...

I actually got the advice to open my business in this form from a tax guy 0 either state or fed. He said that until I'm doing more than $25k annually in business, or hiring employees (not subbing) and paying unemployment, W/H, FICA, etc, that going with a P&SE would allow me to claim expenses for tax purposes but still get the "legitimacy" of having an EIN / business entity, without the annual filing and recording expenses of a corporation.

Re: Question for the business owners... #41930 09/12/04 10:25 PM
Joined: Apr 2002
Posts: 7,218
HotLine1 Offline
Member
Satrted as a sole proprietor, EIN/TIN.State Reg/SS/MEDI/FED WITH/State With/Sales Tax, and whatever else......

After a few years, and growing...lawyer & acct said "LLC is the way to go"!! Filled out & signed a few forms, do a report annually, pay an annual "fee" to the State.

Best advice, as we tell the HO's call a pro!!

Good Luck!!!

John


John
Re: Question for the business owners... #41931 09/13/04 07:53 AM
Joined: Jan 2003
Posts: 45
M
MONOLITH Offline OP
Member
"Instead of spending hours on the 'net and in book stores I suggest you spend $100 or so and talk to an accountant about your own circumstances and where you wish to go."

I agree there's no substitute for proffessional advice. That's why I inquired with you guys. [Linked Image]

One cannot deny though, that in the year 2004, anyone with a little internet savvy can aquire themselves quite an education with the access the global media allows us to not only written materials, but real live human beings, just as you and I are exchanging information right now.

Just to clarify, I did speak to 2 live human CPA's, and another on a business website.

One accountant was adament about going Sole Proprietor, the other said the first was crazy, and I needed to Incorporate. So even they cannot agree. The opinions of CPA's vary as widely as the opinions we have seen here in this thread.

Also, just to not get to far off track, my original posted question was just to get a census of whether those that had incorporated went with S or C type filing. Ironically, in all the posts, that's the one thing not mentioned. [Linked Image]

Re: Question for the business owners... #41932 09/13/04 08:18 AM
Joined: Apr 2001
Posts: 449
F
Fred Offline
Member
Sorry Mono, I've been a sole proprietorship since the start. My brother, who has operated his own buisness since 1967, went to an LLC 5 years ago when he took on his son-in-law as part-owner. LLCs have become popular around here. I don't pretend to understand the pros and cons of corps and LLCs.

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