Business Structure. Sole Proprietor, Partnership, LLC, Corporation?

[youngcivil]

I am new to the forum, but have read a lot of the threads around here and see that a lot of you out there are operating independently or with a very small staff out of your home or a small office. I am currently considering leaving my company and working independently as a licensed Civil.
-What business structure are you operating as, Sole Proprietor, Partnership, LLC, or Corporation?
-Also, any other advice/tips/suggestions/warnings to consider when transitioning from working as an employee to working "freelance"?

Thanks!

 

[zdas04]

My advice would be to wander through the threads in this forum and look at the 20 times we've talked about this topic.

Some will say that LLC or Sub-Chapter S is the ONLY way to go. Others (myself included) will say that incorporation does not protect a P.E. from being personally liable and the tiny bit of work that isn't covered by that factoid isn't worth the cost of drawing up the incorporation papers or maintaining an accounting system that keeps an arm's length between you and the business.

Been in business for 7 years (next week) and have never regretted not spending that money a single time.



David Simpson, PE
MuleShoe Engineering

http://www.muleshoe-eng.com

Please see FAQ731-376 for tips on how to make the best use of Eng-Tips Fora.

"It is always a poor idea to ask your Bridge Club for medical advice or a collection of geek engineers for legal advice"

 

[rbulsara]

I presume you are in the USA.

Beside saying that you should consult a lawyer and accoutant who deals with businesses, LLC is the easiest to start and manage from tax and registration points of view. You can always migrate to other forms later. It affords lesser degree of protection to your private assets from law suits.

Single-member LLC is even disregarded entity for federal taxes, which means you can use Schedule C on 1040. Talk to your accountant, if not get one. If you intend to have employees right away, things gets complicated and more expensive. Avoid that in the beginning.

My state (CT) has a lot of information on their website to help start small businesses. You may want to check your state's website.

As for being a "freelancer" and professional liability and general office insurance, lot of things have been discussed here. Do a search on this website.

If you are serious about having you own business, do it right, right from the beginning. Be a professional from the start. I am not sure being "freelancer" shows a serious intent.

Rafiq Bulsara

http://www.srengineersct.com

 

[beej67]

Single owner LLC is super easy to start with. My tax guy says that once you start making enough money, S-Corp works better for tax reasons, because you can pay yourself a salary, and only pay social security tax on that salary, instead of paying it on your entire earnings. Then cut yourself a dividend check and pay gains on it, but not social security on it.

I'm not an accountant, so I don't know the full details. Best to ask one who does tax stuff regularly. I'm sticking with the easy route for now.

As I understand it, LLC won't protect your personal assets from a professional liability claim, but LLC will insulate your personal assets from someone suing your company for stubbing their toe in your lobby.

Also, search eng-tips. This stuff gets re-covered twice a year. Having some place to ask that very question seems to be what drives a lot of traffic here in the first place.

Hydrology, Drainage Analysis, Flood Studies, and Complex Stormwater Litigation for Atlanta and the South East -

http://www.campbellcivil.com

 

[zdas04]

beej67,
Interesting about saving SS taxes. If the Bush Tax Cuts go away, the Capital Gains tax will go up to wipe out that benefit, but it would have been a cool idea for the last few years. Until last year my Schedule "C" profit was in the basic range of a salary (about 3 times what I was making when I retired, but similar to job offers I've gotten since I retired) so I probably haven't left much on the table. In 2009, I left NOTHING on the table. 2010 is looking better.

David

 

[youngcivil]

Thanks for all the quick advice here. I apologize for bringing up a topic that has already been heavily discussed, I guess I just kind of jumped the gun on it. Anyways I will propose that no further discussion is necessary and I will continue to search around historical forums for previous discussions.

Thanks!