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-   -   should I incorporate? (http://www.wakeworld.com/forum/showthread.php?t=791563)

baitkiller 01-23-2012 6:52 AM

should I incorporate?
 
As a consulting business a LLC would offer me some protection.

I am not the most organized person, quarterlies would likely get missed or chronically late.

As stated above my business acumen is lacking. I am good at what I do and the product i produce, It's the management side that gets all loused up.

If I pay myself a small salary then I can avoid the self employment tax from Hell.
This would be at least 3K a year.

Will I become a larger audit risk?

My accountant, who cleans up my messes, advises against it.
I am not sure.
Your thoughts?

shawndoggy 01-23-2012 7:09 AM

An LLC (or any other entity for that matter) cannot shield you from your own personal negligence. If you act negligently, you can be sued personally, whether or not you have an LLC. As a shield from negligence for a sole proprietor, insurance is always the best first line of defense.

If you elect to be taxed as an S Corp, your LLC may be able to shield you from some self employment taxes. You need to pay yourself (via payroll from the LLC) a reasonable wage, and can take profits in excess of the reasonable wage as distributions which aren't subject to self employment taxes. You and your accountant will need to determine what's a reasonable wage, but it can't be ridiculously low.

For the LLC to "work" you need to keep your personal finances and the LLC's finances absolutely separate and distinct. No buying groceries with the LLC debit card, no paying for the kids' soccer camp from the LLC checking account.

As far as the tax "savings" go, you should plan on paying your accountant a little more to manage your finances a bit more closely, since you have admitted that you are unlikely to be able to do it efficiently yourself. You also need to budget for organizing the LLC and paying annual filing fees, business licenses, etc. Then you have to weigh the net savings after all of those costs against the pain in the ass factor of having more paperwork and procedure.

baitkiller 01-23-2012 7:33 AM

The separation of money would get buggered up for sure. I am constantly shuffling money between accounts. The velocity of money through me is astounding.
I wish I was as good at managing my business and money as I am at doing my job. I have good and bad days but cannot seem to keep it all in line. I am no kid and it is somewhat embarrassing to admit it.

So for a small one pony show like mine that takes in around 150k or less may not be worth it in the end?

buffalow 01-23-2012 7:45 AM

Hey Bait, I have been self-employed/incorporated for almost 20 years. Before that I managed several hundred employees for two companies. I have watched an amazing amount of companies come and go. It seems like the #1 reason is that the owner does not know how to manage the business finance side of things. it is rarely because they are not good at their job or their trade. Since you are aware of your weaknesses I would personally suggest getting a accountant/money manager to be in involved in ALL of your financial matters. It will be a pain and you will get sick of answering to someone, but they will keep you in business. They need to be relentless in doing the "right" way and not giving into you for whatever you see fit. This way you can focus on doing what you do best and let them focus on what they do best. I might also recommend you look around for a business coach. They are fairly inexpensive, but can seriously help a guy in your situation. I look at it this way - If you make mistakes with your money/taxes - it is just a matter of time before you either forget to bill customers/pay bills or get audited. Since you know the issues, make it your highest priority to fix it. It's great that you are honest with your self. Now get some professional help in those areas of weakness.

I offer my advice/help any time you want for free, hit me up personally if you ever need.

ScottR 01-23-2012 7:51 AM

I too and in business for myself and I am a S-Corp. You have gotten some great advice here. I have seen numerous people fail in my business because they can't RUN the business. That is the one thing you know you are not good at, so just like anything, admitting it is half the battle. Hire a CFO type, if you can afford it. Or find someone who has run a successful business and use them as a mentor. I too would offer up anything advice wise you would want or need.

I love the actual running of the business and hardly do anything else. I have a staff in place to do the selling and service of our agency and all I do is manage and make decisions and run the business. I like that more than talking to client if I were to be honest.

Best advice I can give is to find someone you trust to help you while you learn. You REALLY can learn to run the business, however you can fail before you learn which is a tough lesson to learn.

baitkiller 01-23-2012 8:01 AM

Thanks guys, I never thought of a coach.
I would so much further ahead in life, likely owning my own marina, if I had some skills.

buffalow 01-23-2012 11:12 AM

Look around the web for professional business coaches, there are several free agencies and many paid versions. Check your local Small Business agencies which normally have a few of these guys in the group. Also checked Linkedin for your area - tons of guys there.

Or you can always use a few of us for free.

BE PREPARED FOR THE TRUTH either way. You may not like what you hear or what is recommend. Successful business people understand that and deal with it.

ScottR 01-23-2012 11:21 AM

True Jason!

ottog1979 01-23-2012 11:38 AM

I am self employed and have an S Corp also. Before that (6-7 years ago), I was just a sole proprietor. While initially a hassle, it's been well worth it. It's really not that hard and not that much to keep up on. The self employment tax savings are pretty good.


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