Sole Proprietor or LLC

**angryhippie** · 10-25-2011, 12:50 PM

More of a business question than a marketing question; but do you operate your business as a sole proprietorship or an LLC and why?

**Andrew Dewey** · 10-25-2011, 04:10 PM

Please, Please talk with your accountant/lawyer/financial adviser before making a decision regarding choice of business entity. The wrong choice could cost you serious bucks. Now to answer your question - neither. My business is at this point a hobby and so my income and expenses are reported on my personal tax return. If someone gets sick from eating my honey or gets seriously stung by my bees and I am somehow am deemed negligent, I will be in serious trouble as I carry no insurance for that sort of thing.

**angryhippie** · 10-25-2011, 04:15 PM

Andrew - By definition, that is a sole proprietorship. You are bearing all of the risk and responsibility, put also receiving all of the profit/loss on your 1040

**Barry** · 10-25-2011, 04:18 PM

I think you would be in serious trouble regardless of what business structure you use. The s corp. and LLC don't have the liability protection they once had. I'm a s corp, but thinking about going back to sole proprietor. You have to weigh the cpa fees for a corp vs. the lower cost for a proprietorship over what you save in taxes.

**Solomon Parker** · 10-25-2011, 05:11 PM

I'm essentially a sole proprietorship. But I haven't made a profit yet so it just goes in on my 1040. It's still my goal to make a profit though!!! Maybe as I continue to find what works best. Until then, it's a hobby.

**Andrew Dewey** · 10-25-2011, 05:34 PM

The key word in my post is "hobby" - income as misc income (line 17 I think) and expenses to the extent of income on Schedule A. If I were to meet the criteria of operating as a business, I could easily be showing losses to wash against other income.

**Steve10** · 10-25-2011, 05:50 PM

I have had businesses run as C-corps, S-corps, and LLC's. Now, I run all my businesses as Sole Proprietorships. As to why, it's much easier paperwork and tax-wise. Also, any of the "corporations" only give you a false sense of security against personal liability. You're better off spending your money on a good agricultural insurance policy if you're worried about liability.

**RiodeLobo** · 10-28-2011, 04:12 PM

Originally Posted by Steve10

spending your money on a good agricultural insurance policy if you're worried about liability.

Best advice so far, in any business. Don't risk your own livelihood on an accident or other unforeseen event. The piece of mind is worth the expense.

**StevenG** · 10-31-2011, 11:33 AM

Different states, different situations. I set up an LLC here in Missouri, and use Turbo Tax to do my taxes. Did not need a CPA to do either. State has forms on their web site for LLC. But you need to examine your situation, and obviously do what is best for you.
Regards,
Steven

**bwhitecpa** · 11-03-2011, 02:24 PM

An attorney once told me,"The entity type protects you from your company, insurance protects your company from the public." Nice clarification from a young lawyer.

As far as the tax ramifications of choosing an entity, I would speak to an accountant that is familiar with your state tax laws. In Mississippi, it is usually preferrable to use S Corporations...but neighboring states like Tennessee do not recognize the "S" election and you are treated as a C Corporation (thus, you get double-taxed).

**Stevebeeman** · 11-07-2011, 05:08 PM

There is no reason to be a LLC or a Corporation until you are sued, then they will become the most important business step you can take... but then it's too late.

**Eyeshooter** · 11-19-2011, 04:40 PM

Several speakers at the EAS this year mentioned having insurance and forming a LLC. I spoke to my CPA about it over lunch and he suggested downloading the forms directly from the State of New Hampshire website. I did so on Monday, mailed the $100 and the very easy forms on Tuesday and on Friday received my paperwork back stamped and approved. Today, I opened the checking account. My insurance agent is checking on a farm policy for us as we plan to sell honey, candles, soap, eggs and eventually some organic chickens and a couple of pigs. Only thing that concerned her was the soap but she's sent it all out for bid. We'll see...I'm hope to "retire" next year (if one can "retire" to farming). I figure after a lifetime of saving, it would be terrible to loose it all now.

**My Local Bees** · 12-28-2011, 06:45 PM

In most states you may register your business as a Single-Member LLC and report your income and expenses on your personal 1040 tax return. In theory this would provide the business owner with limited liability protection. In most small businesses the owner will be required to sign a personal guarantee for any major purchase on credit.

In my day job I work as an accountant. Bees are much more fun.

Doug

mylocalbees.wordpress.com

**Kingfisher Apiaries** · 12-28-2011, 08:52 PM

Originally Posted by My Local Bees

In most states you may register your business as a Single-Member LLC and report your income and expenses on your personal 1040 tax return. In theory this would provide the business owner with limited liability protection. In most small businesses the owner will be required to sign a personal guarantee for any major purchase on credit.

That is how we are/were set up. I am changing it over to having multi-member LLC in the next week. The single member LLC is the perfect hybrid of simplicity and liability protection.
AND INSURANCE INSURANCE INSURANCE. Insurance is cheap for a small business. Well worth it.
Get the advice of an accountant and a lawyer. Its the best decision we have made. Its well worth the cost. I actually yard bees at my accountant's farm. Works well for both of us.
Mike