jonathan_brown1 Posted February 26, 2005 Share Posted February 26, 2005 My wife and I have a photography business which is growing nicely. With this growth comes more legal concerns about liability and protecting our personal assets in case something goes really wrong. At this time I am looking into liability insurance and would like some input on what others have chosen for your business entity. We are currently a sole proprietorship but I am thinking an LLC is our best choice but I would like to hear what others think about this versus a Sub S corp? Who has chosen which and why if you do not mind? Thanks for your help. Link to comment Share on other sites More sharing options...
mark feldstein Posted February 26, 2005 Share Posted February 26, 2005 Hi Jon. Remember, if you form an LLC and don't run it absolutely according to the book, with adequate corporate records, etc., then if you're sued, they'll try and pierce the corporate veil and claim it's being run as a sole proprietorship anyway. Meanwhile, Sub-S corps are becoming more scarce for reasons I don't quite understand. My advice is for you to drop a dime and talk to a CPA (or really good accountant that you know) to discuss your specific business requirements, assets, income, etc. with them and get a reality based decision based on your own specific situation. Take it light. Mark Link to comment Share on other sites More sharing options...
jonathan_brown1 Posted February 26, 2005 Author Share Posted February 26, 2005 Thanks for the response I forgot to mention I have spoken with my CPA and he advised an LLC for my situation. I was just looking for input form others in my space to see what they are going. Thanks, Link to comment Share on other sites More sharing options...
kieran_mullen Posted February 26, 2005 Share Posted February 26, 2005 Any reason as to why he suggested this? (so we may learn too) Thanks Kieran Mullen Link to comment Share on other sites More sharing options...
jonathan_brown1 Posted February 26, 2005 Author Share Posted February 26, 2005 He suggested an LLC because it provides protection for our personal assets, does not cost as much as a sub S corp to set up and form, and if set up in a certain manner you can still file a schedule C for taxes just like a sole proprietorship instead of the extra form required for corporations. These are of course generalizations and keep in mind that I have not talked to a lawyer yet, just done a lot of research on the issue and spoken with my CPA and a couple of other non-photogs with business experience. Link to comment Share on other sites More sharing options...
lyle_aldridge1 Posted February 27, 2005 Share Posted February 27, 2005 Johnathan, it sounds like you might have misunderstood a little. LLC and Sub S are not necessarily two different things. The LLC is a business form authorized by the laws of your <i>state.</i> Subchapter S is a method of <i>federal</i> taxation. If you form an LLC, you still need to operate it as a Sub S to get favorable federal tax treatment.<p> Your CPA probably advised you to choose the LLC over a general corporation. That's usually good advice, because the LLC is easier to form and operate. The main advantage of either form for a small business is that it allows you to pay certain expenses (rent, insurance, etc.) with money that doesn't get included in your income for tax purposes. It also allows you to set up tax-deferred savings and benefit plans that are somewhat more favorable than what's availble for an individual.<p> The "protection of assets" benefit is limited. Bear in mind that it only protects against contractual liabilities and liability for acts of others. For this reason, any sophisticated business person (banker, landlord) who deals with an LLC or any other business entity will require you to guarantee large obligations personally. That sidesteps the protection. And if you are the person driving the company car who runs down a pedestrian, you can still be sued for it. The protection applies only if some other employee was negligent.<p> Probably more than you wanted to know. Follow the advice from the CPA. Link to comment Share on other sites More sharing options...
gpdno Posted February 27, 2005 Share Posted February 27, 2005 I choose to form a LLC this year on the advice of my attorney and CPA. For me the LLC provided the same level of asset protection an S corp would and LLC is much cheaper and easier to form (at least in AZ). My main rational for forming and LLC was to separate my personal and business assets in the unfortunate event of a lawsuit. Bearing that in mind, my business still caries liability (and equipment) insurance. Obviously, if my company was to take out a large loan (depending on the companies assets), I might have to secure the loan with personal assets but this would be the case if I chose and LLC or S corp. Link to comment Share on other sites More sharing options...
darklights Posted March 4, 2005 Share Posted March 4, 2005 My brother-in-law and I operated an LLC a few years back, between the legalities of business setup and the simple insurance we purchased our tails were very well covered. Listen to the CPA, they really are quite good at their jobs if they have any decent clientel base. Most reputable CPAs' really do have your best interest in mind, after all...if they want to keep your business coming back they have to do their jobs right. Link to comment Share on other sites More sharing options...
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