Considering starting small business - LLC, Inc, etc?

ecnal · Nov 8, 2009

Hey. I'm contemplating in the future starting a small out-of-home business. Simple stuff; selling prints, senior portraits, etc. Just tossing around ideas now.

For those of you that do this - what are you? LLC? Inc? Sole Proprietorship?

I know I could just do it 'under the table', but that opens up alot of legal issues - taxes, legal issues, etc.

Just curious!

KmH · Nov 9, 2009

ecnal said:
Hey. I'm contemplating in the future starting a small out-of-home business. Simple stuff; selling prints, senior portraits, etc. Just tossing around ideas now.

For those of you that do this - what are you? LLC? Inc? Sole Proprietorship?

I know I could just do it 'under the table', but that opens up alot of legal issues - taxes, legal issues, etc.

Just curious!

Your safest bet is to consult a local attorney for advice.

For a small out-of-the-home business a sole proprietorship is the easiest to set up and the least costly to maintain. However, both your business and personal assets are at risk were you to lose a substantial law suit. The way to minimize your financial exposure is making sure you have quality business liability insurance. Your homeowners insurance likely won't cover any aspect of an in-home business. If you currently have your camera gear insured under your homeowners policy, the instant you start using your gear in a business it will no longer be covered by the home policy.

Being a Limited Liability Corporation (LLC) removes your personal assets from exposure, but requires more routine reporting and record keeping, which usually means retaining a CPA to handle all the record keeping and reporting requirements. So, the cost to setup and maintain a LLC is higher than the cost for maintaining a sole proprietorship. LLC's are not generally recommended (because of the cost to maintain them) until yearly net income exceeds $40,000 or so.

There are several kinds of corporations. Small businesses that incorporate usually opt for the sub-chapter S type of corporation. As above, the time to seriously consider incorporation is when yearly revenue hits the 6 figure range. Stepping up to a sub-chapter S corporation will include an increase in record keeping and reporting requirements also increasing the monthly costs.