What Business Entity?

[lancerplayer]

I'm considering starting a small marketing company that will focus on social media for local, "mom and pop" type businesses.

I have a business plan in place, however, I am unsure how to legally structure the business. I'm unsure what proper business entity is best for me.

I was originally thinking that a simple DBA will work and it will, but I do not like the idea that my personal assets are exposed to risk.

Thinking of worst case scenarios, what's the worst that can happen? I am working with small businesses in small suburbs, what can I get sued for? Off the top of my head; breach of contract, copyrighting or trademarking?

There will be one employee: me

Can those involved in the marketing/consulting business chime in with their suggestions on what's the worst that can happen?

 

[hattaresguy]

Just form an LLC and call it good. As your business grows you can afford to hire experts and they will tell you how to structure it from their.

Sole proprietorship is probably also fine. Realistically your not in a high liability business so your chances of getting sued are small. Protecting against lawsuits is a lot more complicated than just setting up a business entity, especially when dealing with contracts.

If your in a high liability business like I am you have to protect your assets threw layers of business structures, insurance, and really, really good lawyers. The idea is to make it so expensive for the ambulance chaser to sue you and locate your actual assets they give up.

 

[BubbaFL]

LLC's are nice because you can start off with sole prop tax treatment (less hassle when you're getting bootstrapped) and then elect to be taxed as a corporation later.

IMO, you should talk to an attorney - or at the least, a business incorporation firm that does business in your state. Entity choice is heavily dependent on state law.

Also find a qualified financial advisor (EA or CPA would be good) about tax implications, filing requirements, and tax prep costs for the different types of entities.

 

[SatinSilver]

Are you leaving your accounting job?

You can be sued at anytime, by anyone for anything. A local transportation company here has a full time attorney on staff. To quickly put out any fires that may arise. Initial consultations with attorneys are usually free. So talk to a few of them. Call the Cleveland or Cuyahoga County Bar Association for recommendations. They will ask what field. Call a few times for referrals.

 

[JimPghPA]

LLC is the only way to go.

 

[lancerplayer]

Originally Posted By: hattaresguy
Just form an LLC and call it good. As your business grows you can afford to hire experts and they will tell you how to structure it from their.

Sole proprietorship is probably also fine. Realistically your not in a high liability business so your chances of getting sued are small. Protecting against lawsuits is a lot more complicated than just setting up a business entity, especially when dealing with contracts.

If your in a high liability business like I am you have to protect your assets threw layers of business structures, insurance, and really, really good lawyers. The idea is to make it so expensive for the ambulance chaser to sue you and locate your actual assets they give up.


Thanks for the reply. I was leaning towards the LLC route, for the more simple Schedule C tax filing.

Originally Posted By: BubbaFL
LLC's are nice because you can start off with sole prop tax treatment (less hassle when you're getting bootstrapped) and then elect to be taxed as a corporation later.

IMO, you should talk to an attorney - or at the least, a business incorporation firm that does business in your state. Entity choice is heavily dependent on state law.

Also find a qualified financial advisor (EA or CPA would be good) about tax implications, filing requirements, and tax prep costs for the different types of entities.


Thanks for the reply. I will for sure be bootstrapping this business with my goal being to run it debt free. I will be contacting a few college professors (attorneys and CPA's) to get some advice on what they believe to be best. They love hearing about former students starting businesses.

Originally Posted By: satinsilver
Are you leaving your accounting job?

You can be sued at anytime, by anyone for anything. A local transportation company here has a full time attorney on staff. To quickly put out any fires that may arise. Initial consultations with attorneys are usually free. So talk to a few of them. Call the Cleveland or Cuyahoga County Bar Association for recommendations. They will ask what field. Call a few times for referrals.


Thanks for the reply. I will remain at my accounting job full time and this idea will be my side business or "side hustle" as some call it.

I've always had the goal to form and run my own business and am finally sick of it only being an idea. Now is the time I put my ideas in action and go for it.

 

[strat81]

Even with a corporation or LLC, you (personally) can be sued and your assets can be at risk. Speak to an attorney about what degree of exposure you have.

As my attorney explained it to me for my company: I have an LLC for a firearm training company. If the LLC buys $50,000 worth of stuff on account and fails to pay it, they generally cannot successfully sue Mr. strat81, only GunCo LLC. That is, only GunCo's assets are at risk.

If I take a class of new shooters to the range, and I get drunk, fail to observe the firing line, and someone gets hurt, Mr. strat81 may be successfully sued for negligence, and my personal assets would be at risk.

Once you talk to an attorney, speak to an insurance agent. Most businesses should have some sort of liability insurance. If you have substantial personal assets, also look in to an umbrella policy and/or other supplemental policies.



Since you are an accountant, I presume you know the advantages/disadvantages of filing Sch. C, 1065, 1120, and 1120S. Remember that the IRS is cracking down on s-corps that do not pay wages.

 

[Barkleymut]

I have owned two businesses and have been advised both times by different accountants that SCorp is the way to go. YMMV

 

[JerryBob]

Who knows. You could probably get sued if you're driving to a client and run over a high-earning individual. Just cover yourself, and form a LLC. Mitt Romney will still consider you a person.

 

[BMWTurboDzl]

Single Member LLC. File in Nevada (Nevada affords SMLLC the same liability protection as Member LLC) . You can use Schedule C on your taxes as well. S-corp next.

 

[Pablo]

If you aren't hiring anyone, anything beyond an LLC is not buying you much for the extra bookkeeping expense.

Sure, anyone can sue anyone for just about anything today. Corporations are larger targets, or at least it seems so, yeah it doesn't matter in that dept. Don't sweat that part. Not sure if you need insurance though.

 

[Whitewolf]

Originally Posted By: JimPghPA
LLC is the only way to go.


I agree that LLC is the way to go based in the advice that my attorney provided.