Quote:
Originally Posted by Jean-Paul
I was a sole proprietor for the first 5 years I was in business. It is fine, but you get much better tax advantages being incorporated, plus your personal assets are protected by the corporate veil if your business tanks. In other words, if your business closes with you owing money, they can't come after your house.
S-corp is easy if you are going to be the sole owner. I'm set up as an LLC, primarily because it makes it easy for me to take on investors, which when I first incorporated, I needed. I had investors buy in, and I bought it back from them over time (with interest of course). Once I had paid them all off completely, I gave my wife 1% so I could maintain LLC status in case I needed to raise more money later. It's a lot easier sometimes than going to banks, or in conjunction with going to banks.
LLC also has a very cut and dry tax code. I pay an annual "franchise tax" which is pretty low, and other than that I just have to keep up with my 941's. DO NOT fall behind on your 941's!
S-corp is the way to go if you are basically going to be a one-man operation, like if you were independent, working out of several clubs, of if you owned a small gym.
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EDIT: I realized I didn't read this entire thread, so this info is a bit redundant; it looks like GQ got some similar info. But, here goes anyway.
JP, I'm not really sure what you mean by your interchanging use of the terms LLC and S corp.
I'm set up as a Limited Liability Company, which is NOT a corporation, S or C. A corporation, S or C, is a distinctly different type of entity, both in terms of operations and taxation. I suppose it could be different in Arkansas, but by now, the feds/IRS recognize LLC's as a distinct type of business entity, separate from being a corporation.
The idea of being an LLC is that it offers protection of personal assets (Limited Liability), but isn't really more complicated than being a sole proprietor. You can be a sole owner of an LLC and then just file a schedule C along with your regular income taxes, like a sole proprietor (which is what I do). As an LLC, you do have to get a Federal tax ID number (free and easy, over the telephone), rather than just using your social security number.
As you noted, an LLC can also be set up with multiple owners, and they can each have different stakes in the company, more akin to a partnership than shareholders.
If you don't need to be incorporated or won't really experience any significant tax advantages by doing so (and there might even be disadvantages, depending on level of income), then the LLC is the way to go. And it's a lot simpler to maintain and report than formally incorporating as a corporation, even a S corp. In Minnesota, it's essentially one form, and a second one for an assumed name, if you want to do business under a a different name or names. But it is NOT the same as incorporating as an S corp.
I may be incorporating for potential tax advantages if I expand my business in some ways I'm exploring. But, right now, I am better off just being an LLC and it's really no more complicated than being a sole proprietor, aside from annual business registration.
GQ, just do some searches online for info on this. A good place to look is your state's office, whatever it might be called, that oversees business filings. In Minnesota, it's the Secretary of State's office.
Also, NOLO press has lots of good publications about such matters. Some of their info may be online, but I bet your local library also has several titles, since they are a recognized standard for info on legal and business matters for do it yourself-ers.
As far as chamber of commerce membership, you can join as an individual or sole owner as long you are doing some type of business. You can even just join as you, I think.
Also, check you any local chapters of BNI, Business Networking International.
I've been a Chamber member (still am) and it's cheap where my business is. In some places, it can cost a bit to go to lots of events. I joined BNI last year, and it's working out really well for me, since it's specifically oriented toward networking and getting more business, much more so that many chambers of commerce, I bet.
For martial arts, networking, speaking and word of mouth are without a doubt the best ways to go, and happen to be very cost effective. Print ads are a complete waste of money.