Business License?

[i-shoot]

Wondering how many of you have incorported your self (LLC?) or have you taken out a small business license? Just getting started...appreciate any suggestions.

[Brooklyn]

Hi, if you are a freelancer you don't need to be incorporated as long as you are doing business under your name, this form of doing business is the moast simple one. if you want to do business under a different name you could regetster it as dba basicly it's the same as previous but the name of a business could be any name you want to use. There are some benefits to incorporating a business and that's less liability for you as a person, in above examples your personal finances and your business finances are the same and if something goes wrong with your business the courts could go after your house, car and other colateral you have on the other hand if you are incoperated they could only go after your incorporation and not after your personal finances. There are other tax considerations but I sugest you talk to an acountant in regards as every state law is different.

[Baltimore Shooter]

Registering as a dba, go to your state's Department of Assessments and Taxation.

Warren

[Nino]

There are some benefits to incorporating a business and that's less liability for you as a person, in above examples your personal finances and your business finances are the same and if something goes wrong with your business the courts could go after your house, car and other colateral you have on the other hand if you are incoperated they could only go after your incorporation and not after your personal finances.

For an established corporation with lots of assets it’s real, but for a small or start-up corporation it’s a myth.

For every corporation there are mandated by law the “responsible officers” these are usually the president, vice president and the treasurers. These officers (they don’t necessarily need to be salary employees) are totally responsible and fully liable for the company operation, they are in fact the corporation.

The only exemption would be if the company obtains a loan, signs a lease or agreement as a corporation only in that case the corporation and its assets might be solely responsible. Good luck in getting a loan or sign a lease without a personal signature. On most loans and leases you’ll find a signature line for the responsible officer and another as an individual, this means that in case of default they can go after the corporation, the individual or both. As far as the federal or state governments goes, even if the corporation file for bankruptcy and there are taxes due they’ll first go after the corporation assets as a priority creditor and then if there’s not enough to satisfy the debt they’ll go after all the responsible officers collectively until they get their money. They might also place a tax lean on all the officer’s personal assets while they sort out who has what. So if a friend of yours gives you the honor of being the vice-president of his new company, think twice.

Of course always consult an attorney

[BluesCam]

In most locales you do need to get a business license and pay property taxes and collect sales tax. Such fun. Talk to an attorney about the advantages & disadvantages of each type of operation (sole prop, corp, LLC). Talk to a CPA as well, especially if you can find one experienced in our line of work. I'm a subchapter S corp.

[Matt Box]

Also remember to search this forum for more answers to this question. It has come up more than a few times before.

[Graybeard]

Incorporating (full) has worked out well for me. And the corporation has lasted for almost twenty years.
My partner/soundman and I incorporated from the beginning on a fifty/fifty basis. The corporation owns all the gear, and two vehicles. This simplifies things at tax time, and if carefully managed allows for "no profit" for the corporation, and consequently no, or minimal, taxes.
You would not want to do this if you are the sole owner of all the gear and vehicles.

[Matt Box]

"You would not want to do this if you are the sole owner of all the gear and vehicles"

---Why?

[Nino]

"You would not want to do this if you are the sole owner of all the gear and vehicles"

---Why?

I think what Greybeard meant was that if you are an individual owner incorporating is not necessary or you have to outweigh the benefits vs. the additional costs and mandatory paperwork necessary to maintain a corporation. In his case he and his partner equally own the corporation assets. When the corporation was formed a number of private stocks were issued and they are closely held by the two stockholders in an equal number of shares. Incorporating is highly recommended when more than one individual is involved in the ownership of assets. The distribution of initially issued stock is usually determined by the amount of individual investment to the company assets. Assets don’t necessarily need to be tangible goods; many corporations are formed where one of the shareholders does not contribute anything but his knowledge or intellectual properties. Again, consult with an appropriate attorney, and, each partner or future shareholder should consult with his own attorney before making the investment to make sure that each investor will be protected once the honeymoon period is over.

[Baltimore Shooter]

There are one person corporations, though I can't remember what that's called. There is also the LLC route.

Warren

[BluesCam]

If you go the corp route get an attorney to write your articles of incorporation to give you benefits paid for by the corporation.
It cost me $500 for the attorney to do everything.
Here's some comparison info: http://www.llcweb.com/struc.htm
http://www.powerhomebiz.com/vol136/structure.htm
http://www.mycorporation.com/llcforms.htm

[freedom]

I incorporated to get higher pension allowances.

Back when (I don't know the current laws) a freelancer DBA could put away something like 15% of income. All your money is in one pile and you can take 15% of that and put it in a pension fund. A corporation can allocate up to 25% match to your salary for pension. IOW, for every $100 you take as payroll, you then have the corp put away another $25 into your pension fund.

The downside is that you do regular payroll taxes, meaning 7.5% from your paycheck and 7.5% company match. I believe sole prop has a total of 12.5% so you save a bit on the SSA tax.

I definately suggest you do some serious research into all the CURRENT laws regarding pension, SSA & taxes.

FYI, if you incorp, all the benefits you give yourself, you have to give to all employees. There are some details to look at but that can be an issue.

You should have a tax advisor and an attorney advise you.

[Graybeard]

I think what Greybeard meant was that if you are an individual owner incorporating is not necessary or you have to outweigh the benefits vs. the additional costs and mandatory paperwork necessary to maintain a corporation. In his case he and his partner equally own the corporation assets. When the corporation was formed a number of private stocks were issued and they are closely held by the two stockholders in an equal number of shares. Incorporating is highly recommended when more than one individual is involved in the ownership of assets.

Exactly Nino. Freedom is correct too, when he mentioned that you can put more money away, tax free, than if you were not incorporated.

I look at it as our small way of taking advantage of the laws that these corporate weasels have gotten inserted into the tax code. It's poetic justice that people who actually work for a living can use these provisions to accumulate a few more bucks.

I realize that most freelancers don't have this sort of arrangement, because they own all the gear themselves. But only a lawyer, or as in my case a sharp accountant, can tell if this route is correct for you.

[Baltimore Shooter]

Anyone know if you can you get the same tax savings that Freedom talked about if you were an LLC?

Warren