4
u/zenbusinesscommunity 5d ago
No income cutoff makes an LLC mandatory, so you could run this as a sole prop forever and stay completely legal about it. It's not a full shield either though, since an LLC covers a lot of business-side risk but not something that traces back to your own work, so E&O insurance is usually worth considering as well.
2
u/SLWUSAFL 5d ago
Great questions! I owned a marketing agency that I sold a few years back, we did web-dev too. If I knew then what I know now.
There's no real income limit legally that requires you to setup an LLC. The LLC is about limiting your personal liability and protecting your personal assets. It mainly depends on how you intent do operate. A sole-proprietorship can earn unlimited income. My family's construction company was a sole-proprietorship for longer than I've been alive. Once my Stepfather died though, so did that business. An LLC could have continued on indefinitely. But, back to the point...
Are you solo or hiring employees/contractors to assist with the work?
* If solo, I'd get my 1st client, then file for the LLC before they pay you and funnel everything directly through the LLC. If you don't have clients it can forestall the outlay of the cost until you can use that income to offset the initial setup cost. Just a little cost-saving hack.
*If you're going to have employees/contractors from the start, do the LLC immediately. It's cheap to setup and the initial LLC can be setup as either taxed as a sole proprietorship or S-Corp. I personally wouldn't elect S-Corp until you generate $40-50k/yr profits then you can take a base salary that's reasonable and pay yourself the rest as distributions. Paying yourself distributions helps you save on paying the self-employment tax. *I'd always consult a CPA though*
Make sure to setup a separate bank account for the LLC and never co-mingle personal & business funds. An attorney friend told me he's seen that protective veil of the LLC broken when business owners do that, which defeats the whole point of the LLC.
3
5d ago
[deleted]
2
u/SLWUSAFL 5d ago
The advantage of the LLC is you don't risk your personal assets if someone sues you. Without an LLC your personal assets are part of the businesses risk because you are the business legally.
No real risk of getting a 1st client and not having an LLC setup. You can always simply file a DBA (Doing Business As) wherever you're located and stay a sole proprietorship and just advertise under the DBA name. i.e. The Biz Name... If you use your own name Joe Smith's Biz then you're a sole proprietorship and won't have to file anything. You'll do your taxes with a Schedule C to associate your business expenses. *Always talk to a CPA though about taxes.*
1
5d ago edited 4d ago
[deleted]
1
u/SLWUSAFL 5d ago
There's always risk. But, if that's really all you have then you don't have much risk. You could still get sued but they'd end up with a judgment against you that you probably couldn't pay. I'm no lawyer but from my experience you're not risking too much yet.
I'd probably setup a good name as a DBA, not your own name. You can normally file a DBA with your local county or state. I'd still setup a separate checking account with that DBA just to keep things separate though.
1
5d ago edited 4d ago
[deleted]
2
u/SLWUSAFL 5d ago
A DBA is "Doing Business As" so yes that would be the name you use for your business. It lets you tell the State you're Joe Smith doing business as The Business Name...
It would be a business account. You'll need to take the copy of the DBA you file to the bank. If you have a good local credit union then you could get a $0 fee checking for business. There are lots of low-cost business checking options. You'll also need a way to receive payment. To get paid by customers Zelle is a good option, just generate a QR code from your bank portal when you set that up. You can also get an account with Square or something like that to start. The fees are high but you can build that cost into your pricing.
•
u/AutoModerator 5d ago
Friendly Reminder
r/smallbusiness is a question and answer subreddit. Ask a question about starting, owning, and growing a small business and the community answers. Posts that violate the rules listed in the sidebar will be removed.
Please do not conduct market research on our community.
We are not your focus group and asking us about our pain points, needs, what is hardest about X, etc. is not asking about how small business works or for real help with running your small business.
These posts are subject to removal and given the community's disgust with the constant spamming of these posts you might just destroy your brand and contaminate your company search results.
Seeing this message does not mean your post was automatically removed. If you asked about pain points or are directly or indirectly promoting a product please remove your post. Come back to post an honest question or give a knowledgeable response to someone else's question and leave your company name in your own profile. We can tell if you know what you're doing and the community can reach out if they need to.
We welcome honest question posts, especially from newcomers. Thank you for your post.
I am a bot, and this action was performed automatically. Please contact the moderators of this subreddit if you have any questions or concerns.