Corporation type?

S corporation is the way I went. I think it is the best for your situation. Make yourself an employee of a corporation. Pay yourself every week and take out the taxes. That way you don't have to deal with quarterly estimated taxes. Also if things get real slow you can lay yourself off and collect umemployment.

Tips: Get yourself a good accountant and insurance broker.

I am a solo surveyor set up as a sole proprietor. I couldn't really see the advantage in LLC or incorporating. The so called limits in liability only appear to extend to the debts you incur (and whoever is going to loan you money is probably going to make you sign a personal guarantee). I doesn't appear to protect you from liabilities connected to negligence or malpractice (which are the liabilities that should worry you the most). Plus the added complications with paperwork and taxes. If you are a small time surveyor, I don't see what it gets you.

"It doesn't appear to protect you from liabilities connected to negligence or malpractice (which are the liabilities that should worry you the most)."

I can not speak for Florida but where I practice there is protection.

I'm with Floyd on this one. Outermost Land Survey, Inc. is an S corp. too, it allows a flow through cash accounting almost as if it was a sole proprietorship, there is one more layer of protection for you from debts and liability, and you don't have to advertise that you are a LIMITED LIABILITY COMPANY. That phrase has always bugged me 🙂

There is another choice, PC for Professional Corporation. Many doctors, lawyers and such use. I thought it sounded like a good idea, so I purchased a do it yourself tax program. You can enter data and try different scenarios. When I saw that I would lose an additional 5G in taxes as a corporation, I stayed with solo proprietor and made sure my liability insurance was good.

Gator Boy,

Here is a simplified explanation of the different types.

http://www.tomleggette.com/Advantages_and_Disadvantages.htm

I have been a Sub S since inception in 1986. The main benefit I derive from an "S" is protection of personal assets.

B-)

> ...so I purchased a do it yourself tax program. You can enter data and try different scenarios. When I saw that I would lose an additional 5G in taxes as a corporation, I stayed with solo proprietor and made sure my liability insurance was good.

I'd suggest you spend a couple hundred to hire an expert; as a Prof. Corp., I save a bunch in taxes over being a sole proprietor. Maybe your state is different, but I can't imagine it would be that different.

> as a Prof. Corp., I save a bunch in taxes over being a sole proprietor.

Can you summarize the tax differences? Offhand, I can't see what costs would be deductible for one but not for the other.

> > as a Prof. Corp., I save a bunch in taxes over being a sole proprietor.
>
> Can you summarize the tax differences? Offhand, I can't see what costs would be deductible for one but not for the other.

One of the biggest differences is payroll taxes. Dividends are not subject (yet) to payroll taxes.
Another are "benefits" that can be a business expense (health ins premiums for example).
Assets such as trucks can be handled much "cleaner" if they are owned by a separate entity.

Most similar business entities do not provide much in the form of liability and protection of assets, as closely held businesses are usually not separable from the individual professional.

Talk to a really good tax pro and he should be able to lay it out in more detail.

If there are no tax (and other) advantages, why do most CPA'a and attorneys use them?

Besides, "Professional Corporation" sounds really cool!! 😉

Exactly. Listen to Floyd.

I hate to be the bearer of bad news, but having successfully started, owned, and sold two surveying firms, that is not enough capital. Insufficient startup capital is a recipe for failure. Don't mean to be negative, that's just how it is.

A Professional Corporation is not a different choice but part of the same choice.

In New York the only corporate form legal for professionals is the Professional Corporation. There is an exception for about seven regular surveying corporations formed before 1935. A Professional Corporation is formed under the rules of the State it is in at its creation. Within a certain number of days from a corportation creation, the corporation elects with the IRS what kind of corporation it will be (such as S Corp) for tax purposes. My surveying corporation is, Carrington Land Surveying, P.C. which is also a S Corp.

Another tip: Buy a Business Plan software package. It will tell you if you really want to start a company and at the end give you a product you can give to a bank for a loan.

That's not negative Jim, it is what it is. I had a C corp in MI for 14 yrs, it took me 3 yrs to finally dissolve it when I moved to AZ. At one point I had about 8 employees. The paperwork is mind boggling, so you need a good trustworthy office book keeper type and a semi crooked tax lawyer. Definitely not for the small little guy surveyor type.

Now I have an LLC, but I'm taxed as a sole proprietor. I have no employees and don't plan on any. No 940, 941, Unemployment, etc. Just file 1040 ES every quarter, then annual Schedule C on my 1040 for all the business deductions. Works out pretty good.

I tend to agree with the naysayers who don't really buy into the so called "personal protection" of corporate status. As the principle, you are still on the hook - period. Not to mention your status as a licensed land surveyor in whatever state you work.

Jim nailed it. Friends don't let friends start under-capitalized businesses. The great thing about this situation is: You have alternatives! You can work for two years and save about $30,000 or so and then go for it (still under-capitalized but better than $0.) Business could be said to be a 3-legged stool, with adequate capital, right people, and right market each being a leg. You're starting off from behind. Listen to Jim! I wish I had...;-)

One neglected benefit of an "S" corp is that when you take an "S" distribution (akin to a dividend) you do not pay the 15.3% social security tax. The S dist. is taxed at your
personal tax rate. This is just another advantage over a sole proprieter.

> One neglected benefit of an "S" corp is that when you take an "S" distribution (akin to a dividend) you do not pay the 15.3% social security tax.

This would also seem to reduce your income for SS eligibility. I'm too tired right now (it's late!) to figure out how this might affect SS payments in retirement.

You do not have to be incorporated to take Social Security/Medicare tax free money from your business. When I operated in Colorado as a sole proprietor, the trucks and survey equipment were rented from a partnership (my wife and I) who paid state/fed taxes but no social security/Medicare tax on the rent receipts. My SS record from those years showed no income. Jim correctly points out however that it can come back to bite you in later years. Didn't for me because it was too far back to matter but if I had run that business until retirement that way, right now our monthly income would be reduced by $3900. :excruciating: Ouch! Yes, I know, if my business had made lots of money, I would not need the SS money. But I know of guys who successfully dodged paying into SS for years who now are not so sure it was a good idea. (my brother for one)
And Wayne is exactly on target with his comments on liability.
BTW... I did operate for a while as a sub S corp... made my accountant happy. Go sole proprietor. You will not regret it. Seems like this would be a good subject for a poll.
Another thought on this thread: My dad had a saying..... If you go into business on a shoestring, you will probably take a lacing.

Good Luck.

'Lay yourself off and collect unemployment'

If you are a material owner, typically you can't collect unemployment. You get to pay premiums, but there is a 'laid off by no fault of your own' clause that a owner typically can not meet.

Consult with your state department of labor, all states vary and your mileage will differ.

And certainly don't plan on it, until you have it in hand.

M