Web startups...sole proprietor or LLC?

**randomharp** · 07-16-2008, 12:24 AM

I was trying to find the right forum for this...

For those of you who've managed your own businesses, what's the best to classify it, for tax purposes? I make websites for musicians but this is the first year I'll be launching my own site and I'd like to go about this the right way.

I don't have any employees - at the most, I'll have 3-4 technical consultants and/or extra designers to whom I can outsource small projects to. They will function as independent contractors.

What do small web development firms do? LLC or something else?

**TextAdMarket** · 07-16-2008, 05:17 AM

Absolutely go with the LLC. For about $120 (depending on what state you are in), you will have a huge security blanket in case someone sues you any reason. They'll sue the company's assets; and your personal finances (house, cash, car, etc) will be uninvolved. Being sued isn't likely, but you never know.

Set it up as a sole-owner sole-employee LLC if you don't need employees, and it will be exactly like a Sole Proprietoriship anyway. You won't need to registered for a business TaxID and you can just use your SSN as your business TaxID. Also, you look much more legit if you have a registered LLC.

GoodLuck!

**willcode4beer** · 07-17-2008, 02:35 PM

Actually, they can still go after your house and car if you are an LLC. Especially if you are a one person business. It all depends on the lawyer working against you.

If you are worried about being sued, consider legal liability insurance, regardless of how you set up the business.

On to the main topic. Personally, I prefer a sole proprietorship. You get a lot more freedom in how you run your business and you can keep more of the workings private. Especially if you hire people later on.

As a corporation (under LLC) you are subject to many more rules and regulations. You are also required to make more of your business dealings public.

**randomharp** · 07-17-2008, 05:12 PM

I just had a 20-min phone consultation with a lawyer...I initially called about some intellectual property concerns related to domain names and trademarks (see my thread in the Domains forum) but he also addressed this issue.

While code4beer has a good point, the lawyer said I should go with an LLC.

Of course, the primary objective is to not get sued in the first place, so I'd better play by the rules, and possibly look into insurance.

Thanks for the replies!

**blogdog** · 07-18-2008, 12:04 AM

I've always liked S-corps, but that's just me. Talk to your accountant, too. Very important, depending on your situation.

**eautocad** · 07-30-2008, 04:29 PM

LLC is the way to go... it switches reliability of the companies actions to the company, instead of the individual.

If your company fluffs up, do you want to loose your house, car, savings etc? I don't... thats why I picked "limited liability company"

My liability for it is limited

**willcode4beer** · 07:35 PM

Quote:

Originally Posted by eautocad

LLC is the way to go... it switches reliability of the companies actions to the company, instead of the individual.

If your company fluffs up, do you want to loose your house, car, savings etc? I don't... thats why I picked "limited liability company"

My liability for it is limited

Since you're from my home-state,

I'll send this:
http://www.florida-incorporation.com/types.html
you have to understand that your protection has some limits too:
http://www.orlandobusinesslawyer.com...ons.html#12761
when you are conducting business, people could still sue you, as well as your company.

However, yes it is true, as a corp (C, S, or LLC) you do get more protection.

**eautocad** · 08-01-2008, 02:59 PM

Good information 4beer thank you!

So i'm not super man just because I have an LLC... No robbing banks and claiming, "It's revenue for my LLC so I'm not responsible"

LOL

**theguru** · 08-20-2008, 08:33 PM

I would recommend simply using a sole proprietorship unless there is a compelling reason to incorporate, I rarely see an actual need for an LLC and if you need legal protection an s corp is much better anyway.

**artcoder** · 12-06-2008, 02:42 AM

If you are just starting out and do not file anything, then by default in the United state, you will be consider "sole proprietor". This is fine in the beginning and many start out like this.

However, when you get serious about your business and have many clients, I recommend "single member LLC" in order to separate your business finance and liability from your own personal finance and liability. That means that if someone sue you due to business dealing and they win, then they get your "business money" and can not touch your "personal money". In that sense, you are limiting your liability. Many "sole proprietor" become a company for that very reason.

In many states, you have just as much freedom as a Single Member LLC than as a sole propriator and many states allow the business tax, profit, and loss to be "passed through" onto your personal tax return. Therefore, you handle the tax the same way as sole propriator.

It is easy to form. You can do online. No need to hire a layer. Just have to read up more about how to form a company.

I am talking about the United States, and rules differ slightly from state to state.

**Learning Newbie** · 12-12-2008, 04:36 PM

Quote:

Originally Posted by randomharp

I was trying to find the right forum for this...

For those of you who've managed your own businesses, what's the best to classify it, for tax purposes?

The right forum for this is a pair of lawyers, one of them specializing in taxes. I could tell you exactly what you do, be wrong, and say "Woops, I guess that was bad advice!" You'd be within your rights to be angry at me. On the other hand, if you talk to an attorney, and get terrible advice, that's malpractice. Making whatever they might say far more trustworthy, let alone accurate, coming from a person who knows all of the ins and outs of what they're talking about.