What is the best business type?

I have been a Sub S corporation since 1988. It was, and still is, the least damaging when Income Tax time rolls around. As far as personal asset protection is concerned you should consult an attorney as laws vary from state to state. Good luck! 😎

dhunter, post: 398003, member: 286 wrote: It makes sense to better protect my personal assets by forming some type of corporation or LLC.

Does it? Neither will protect you from a professional negligence award, as professional liability adheres to the licensee, not the business entity under which he operates. It seems to me that maintaining adequate insurance is more important than the choice between corporation, LLC or sole proprietorship when it comes to asset protection.

I've been a California full-time sole proprietor for almost 24 years. When I looked into LLC and corporate structures in the early '90s, neither offered enough of a benefit to justify the additional cost and paperwork. Maybe things have changed since then.

I believe operating as a sole proprietorship offers the best tax advantages and requires simple accounting.

Hi Dennis,

LLC's are not allowed for engineering or surveying businesses in California. When I was in private practice, I initially began as a Sole Proprietor (similar to Jim) but changed to an S Corporation primarily for tax purposes. However, one thing I would suggest for either of those is to obtain a Federal Tax ID for your business. That way, you are using that on your invoices and W-9's to your clients rather than exposing your SS number. Prior to my own business, I was a partner in a C Corporation that changed to an S Corporation the last 10 years again primarily for tax purposes.

As Jim stated, the business model only offers some level of protection from a civil business liability point of view. From a personal financial and professional perspective, it will always be about you the individual. I highly suggest you consult with a small business CPA and attorney.

Good luck

Hi Dennis,

I have zero input on your question, but wish you well in your future business.

Ryan.

What is the best business type?

Profit-making.

(No one else had said it yet, so I had to do it.)

Holy Cow, post: 398066, member: 50 wrote: What is the best business type?

Profit-making.

(No one else had said it yet, so I had to do it.)

What? No self respecting consulting business turns a profit, in the books anyway.

One consderation should be how you property is titled. If you're married you might want to look into Tenants by the Entirety
If everything should go South, at least you can keep your home.

See below (from another web site)

Tenants by the entirety
When two people who are legally married to each other buy real estate together, they can hold title as tenants by the entirety. They own the property together similarly to joint tenancy with the right of survivorship, but debts of one spouse cannot attach to the assets of the other spouse. Also, tenants by the entirety cannot sell their interest in the property to another party without the consent of their spouse.

In community property states, like California, this form of ownership allows for a stepped-up basis of market value of the real estate upon the date of death of the first spouse. The surviving spouse can use the step-up market value of the property to avoid or reduce capital gains taxes when he or she decides to sell.

Because each way holding title to real property has numerous long-term legal implications, it is best to seek the advice of an experienced California real estate attorney when making these decisions.

FL/GA PLS., post: 398004, member: 379 wrote: I have been a Sub S corporation since 1988. It was, and still is, the least damaging when Income Tax time rolls around. As far as personal asset protection is concerned you should consult an attorney as laws vary from state to state. Good luck! 😎

Second with a slight revision to 1997

The corporate veil is easily pierced,but your personal assets cannot be taken. There is no difference in the assets of the person and the assets that are held by the sole proprietorship.

Dane Mince, post: 398530, member: 296 wrote: The corporate veil is easily pierced,but your personal assets cannot be taken.

You might want to take another look at that.

https://www.nolo.com/legal-encyclopedia/personal-liability-piercing-corporate-veil-33006.html&apos ;">If a court pierces a company's corporate veil, the owners, shareholders, or members of a corporation or LLC can be held personally liable for corporate debts. This means creditors can go after the owners' home, bank account, investments, and other assets to satisfy the corporate debt.

When I started my company, I was ready to go LLC, but after talking with my accountant she explained that there were no real protections for me (as Jim notes above), just added aggravation. So I simply went sole proprietorship.

With any type of corporate entity you will find that vendors will require you to provide personal guarantees before they will extend any credit. And professional liability will attach to the licensee - you. So the advantages the corporate veil provides are rather limited for a very small business.

The common advice in Oregon is to go LLC and that is what most surveys here do business as.

The advantage of a Sub S corporate structure is that any profit over and above your own "reasonable" salary is not subject to payroll taxes.

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Mark Mayer, post: 398557, member: 424 wrote: With any type of corporate entity you will find that vendors will require you to provide personal guarantees before they will extend any credit.

I was talking with a developer acquaintance a couple of weeks ago who is putting together a $70M residential project. His business has a 30-history of successful medium-size developments in the area, yet his bank is requiring a personal guarantee in order to make the construction loan. He's having to put up all of his personal assets plus bring in outside investors in order to make it go.

Jim Frame, post: 398563, member: 10 wrote: I was talking with a developer acquaintance a couple of weeks ago who is putting together a $70M residential project. His business has a 30-history of successful medium-size developments in the area, yet his bank is requiring a personal guarantee in order to make the construction loan. He's having to put up all of his personal assets plus bring in outside investors in order to make it go.

The bank is hedging against the next big crash which is theoretically due although the Sacramento region should weather it better due to an influx of Bay Area businesses due to we are actually affordable.

I'm in a hotel in Menlo Park this morning (personal)...Bay Area news item...USPS can't find enough letter carriers to hire, well duh, they can't afford to live here.

Precision-geo-inc, post: 398562, member: 9801 wrote: The advantage of a Sub S corporate structure is that any profit over and above your own "reasonable" salary is not subject to payroll taxes.

That's not as much of an advantage as it may seem. Lowballing the salary in order to take more in dividends can get you in trouble with the IRS. And since the FICA tax stops at $118,500 -- not an unreasonable salary for the principal of a professional services firm -- most of the advantage drops away for profits above that figure. Finally, persistently taking a low salary in favor of dividends can lower your Social Security income when you retire.

Jim Frame, post: 398566, member: 10 wrote: And since the FICA tax stops at $118,500

It's going to be $127,200 in 2017.

Jim Frame, post: 398531, member: 10 wrote: You might want to take another look at that.

https://www.nolo.com/legal-encyclopedia/personal-liability-piercing-corporate-veil-33006.html&apos ;">If a court pierces a company's corporate veil, the owners, shareholders, or members of a corporation or LLC can be held personally liable for corporate debts. This means creditors can go after the owners' home, bank account, investments, and other assets to satisfy the corporate debt.

Damages and debt are different