LLC or Sole Proprietorship ?

[aklovinguy]

Okay guys I have taken the leap , I am starting my own business . I have been doing some research on whether or not I want to be an LLC or SP and I would love some feedback from the tribe.

My business will be internet based, no store front or real estate for now. So there will be less liability in that regards . I don't want to go into details on what my product will be , don't want to make waves with Gabe. This is his house and I respect that. But my products will be original and firearms related..... So I guess my question is , If someone were to misuse one of my products and get themselves hurt , Would it be better for me to be an LLC or SP when they try to sue me?

Thanks in advance for the awesome wisdom that is sure to follow .

[Housertl]

Okay guys I have taken the leap , I am starting my own business . I have been doing some research on whether or not I want to be an LLC or SP and I would love some feedback from the tribe.

My business will be internet based, no store front or real estate for now. So there will be less liability in that regards . I don't want to go into details on what my product will be , don't want to make waves with Gabe. This is his house and I respect that. But my products will be original and firearms related..... So I guess my question is , If someone were to misuse one of my products and get themselves hurt , Would it be better for me to be an LLC or SP when they try to sue me?

Thanks in advance for the awesome wisdom that is sure to follow .

The way I understand it, an SP is technically not a corporate structure. Your company gets sued, YOU get sued. An LLC, on the other hand, is a corporate entity, and if your company gets sued, YOU don't.

The other thing to look at is that the IRS does not recognize the LLC as a corporate structure for tax purposes. You either claim all income as personal income, or you file taxes as an S-Corp. Your accountant/attorney can advise you which is best.

[Chris Upchurch]

LLC, no question. Doing anything in the firearms world without some sort of corporate entity as a shield from liability is a bad idea.

[aklovinguy]

LLC, no question. Doing anything in the firearms world without some sort of corporate entity as a shield from liability is a bad idea.

Thanks a ton Chris ! This the kind of no nonsense advice I was looking for .

[Dorkface]

Llc for sure. keeps you and the business seperate.

[Pokeguyjai]

Talk to a lawyer too. Even though most of the responses are spot on, you should be hearing advice from a lawyer first.

[aklovinguy]

Thanks guys. Nice to know I can jump on WT and get some great council .

[Nick Randall]

I would recommend you have a good grasp on what it takes "to pierce the LLC veil."

[jlbraun]

Okay guys I have taken the leap , I am starting my own business . I have been doing some research on whether or not I want to be an LLC or SP and I would love some feedback from the tribe.

My business will be internet based, no store front or real estate for now. So there will be less liability in that regards . I don't want to go into details on what my product will be , don't want to make waves with Gabe. This is his house and I respect that. But my products will be original and firearms related..... So I guess my question is , If someone were to misuse one of my products and get themselves hurt , Would it be better for me to be an LLC or SP when they try to sue me?

Thanks in advance for the awesome wisdom that is sure to follow .

An LLC can shield you from debts incurred by the LLC and judgements against the LLC if you do not pierce the veil.

However, an LLC will not shield your personal property from your own negligence. The LLC will however protect you personally against your employees' and contractors' negligence, but will not protect them personally.

If you screw up and kill someone through negligence, you are liable personally, LLC or no. So if you are going into business where you can kill someone if you foul up, be really sure that you are really good at what you do.

Then go get professional liability insurance, also known as errors and omissions insurance.

And even then after that, still don't screw up and kill someone.

Source: As a 32 year old consultant, I design things that go on oil tankers. If something I design breaks, a dozen people die horribly and you will see dead oil covered baby seals on CNN. I am good at what I do. I have several million in E&O insurance, but have not ever had a claim.

[ERN]

C-corp is the most hassle, but also the best protection from IRS audit. It keeps the corporate stuff best separated from the personal stuff IMO.

[Gabriel Suarez]

Doing this "on the cheap" is like home testicle surgery...only for fools destined to lose everything. Find an accountant...not a "render to caesar" one, but a pirate. Then find an attorney who is like the accountant.

The only thing I would ever do as an SP is take a crap.

[Gabriel Suarez]

Get two or three LLCs, and then a couple of C corps as shields. Yeah...its a hassle. The more money you make...the more you spend protecting it. The gov.s' job is to steal as much of YOUR money as possible. Enemy attorney's jobs are to steal as much of YOUR money as possible. Your people's job is to hide as much as possible in the corporate web...and make it exceedingly difficlut to get at the rest of it.

Its all a game.

That said...at the very very least...do an LLC.

[Chris Upchurch]

The only thing I would ever do as an SP is take a crap.

Someone will figure out a way to sue you for that.

[Al Lipscomb]

I would start with an LLC. As Gabe mentioned have it set up right. Let everyone know you are setting things up to avoid liability, shield assets and reduce your tax burden.

[JoeB40]

C-corp is the most hassle, but also the best protection from IRS audit. It keeps the corporate stuff best separated from the personal stuff IMO.

I'm actually an S-corp; while I'm CEO I'm also the only employee. Half the money through the front door I take as wages; the other half as profit share. Talk to a good accountant. S-corp is a bit of paper work but with the right guy (my accountant is awesome) it's worth it. LLC's are a lot less paper work, but from what I can tell, they can be an IRS-audit magnet.

[Vigilant]

LLC AT THE MINIMUM! An SP taxes everything directly to you, and an LLC can be taxed as an SP or as an S-corp. This is your minimum of protection, and a true C-corp may be your best bet, but don't listen to a bunch of screen names on the interwebz, even if it is Gabe and he gave sound advice, get a LAWYER, and an ACCOUNTANT, and ask them!

[JustMe]

everything we do is internet based.

i suggest llc.

that said, there is still an issue with your company's domain name. you may well wish to consider a domain registrar in a country which provides more protection than a us registrar will provide. pm me and i can refer you to two of the top domain name lawyers in the world. this is where pure internet based can be a liability.

just note well, many lawyers claim knowledge of domain names, but few actully have accurate knowledge.

[michael]

I'm actually an S-corp; while I'm CEO I'm also the only employee. Half the money through the front door I take as wages; the other half as profit share. Talk to a good accountant. S-corp is a bit of paper work but with the right guy (my accountant is awesome) it's worth it. LLC's are a lot less paper work, but from what I can tell, they can be an IRS-audit magnet.


^This.

When I set up my first investigations company, I went with a s-corp after a lot of consultations with lawyers and other business leaders. It is a hassle, but offers pretty good protection, and better than an LLC, IMO. Don't do anything without fully understanding all of them. None are perfect, but some are better than others.

[back2basics]

S corp is what I have always gone. Definitely don't do sp.

[aklovinguy]

Alrigth, I think it is safe to say that I have ruled out the SP option. I have another question, I know Gabe recomends doing a cash operation to start. When is a good time to go legit? As of right now my business is in the very early stages . I have not made a lot of cash. I am wanting to advertise , get a website , make business cards and have a facebook page . Should I hold off on that till have more capital to do things right?

[aklovinguy]

Get two or three LLCs, and then a couple of C corps as shields. Yeah...its a hassle. The more money you make...the more you spend protecting it. The gov.s' job is to steal as much of YOUR money as possible. Enemy attorney's jobs are to steal as much of YOUR money as possible. Your people's job is to hide as much as possible in the corporate web...and make it exceedingly difficlut to get at the rest of it.

Its all a game.



That said...at the very very least...do an LLC.

I love the idea of being well isulated with multiple LLCs set up. I know of a very good accountant but I have no clue how to find a good attorney.


Thanks for taking the time to post in this thread Gabe, I really respect your business sense.

[aklovinguy]

everything we do is internet based.

i suggest llc.

that said, there is still an issue with your company's domain name. you may well wish to consider a domain registrar in a country which provides more protection than a us registrar will provide. pm me and i can refer you to two of the top domain name lawyers in the world. this is where pure internet based can be a liability.

just note well, many lawyers claim knowledge of domain names, but few actully have accurate knowledge.


Thanks JUSTME, I will have to take you up on that offer .

[Dr_Dave]

Alrigth, I think it is safe to say that I have ruled out the SP option. I have another question, I know Gabe recomends doing a cash operation to start. When is a good time to go legit? As of right now my business is in the very early stages . I have not made a lot of cash. I am wanting to advertise , get a website , make business cards and have a facebook page . Should I hold off on that till have more capital to do things right?
Some of those are free or inexpensive. Claim the website names. I just renewed 3 dummy domains for less than 50 bucks for a year. Once you get the domain the facebook page is free. Vista print has bussiness cards for $10. The big costs are incorporation, accountants, and laywers. They are your best friends however.

[back2basics]

Assuming you are selling a product/service online you are going to need search engine optimization for your website. If it is a more localized business I have had great results with the post office eddm program. Cheapest way to send postcards ad material etc. have a good logo created and put it on everything. Creating a brand takes hard work and money but can be very worthwhile. Basically just make sure you have a marketing budget and can pay your bills for a while.

[JustMe]

Assuming you are selling a product/service online you are going to need search engine optimization for your website.

which is why regging (aging) domains, and having some keyword content, is a good idea asap.

from there most of seo is giving people what they are looking for. do the rounds here and there for backlinks is enough. one top seo domainer pointed out years ago that goggle only ever needed one backlink, from there "content is king".

cut and paste "direct competing sites" meta tags to start, then tweek from there.

[Stoic]

Some great advice in this thread.

[BillyOblivion]

Talk to a lawyer too. Even though most of the responses are spot on, you should be hearing advice from a lawyer first.

This.

IANAL, this is MY understanding, it could be wrong:

There is this notion that having a corporation will protect you from liability. This is only true to an extent, and while I'm not sure exactly what that extent is, things like negligence will go right through the corporation.

Also talk to an accountant, each form of corporation has it's own tax structure and you'll want to pick the right one for your needs.

[Nick Randall]

My understanding is that perhaps the most important thing you can do is to make sure your personal funds and your business funds are completely separated. As in separate accounts. And never commingled.

The IRS charges something like $125 for an EIN number for a business.

[DogDoc]

I'm going through this myself right now with a couple of new businesses. My accountant said to do an LLC and then register it as an S corp. He also said to keep all personal and business finances completely separate in separate accounts.

I had a DBA/Assumed business name for one of the businesses which he said to dissolve immediately once the new LLC was approved. Having a DBA/Assumed business name links you personally to the business so that you and the corporation can both be sued if something goes wrong.

Doc

[Vigilant]

My understanding is that perhaps the most important thing you can do is to make sure your personal funds and your business funds are completely separated. As in separate accounts. And never commingled.

The IRS charges something like $125 for an EIN number for a business.EIN is free! http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/How-to-Apply-for-an-EIN

[jesmith]

Small business owner for twenty six years and been sued. If you personally do the work (or make a product) or personally supervise the work of another, you are liable. Do like Gabe says and silo your business. Marketing and manufacturing should separated if possible. Don't let them cut your throat with one slice.

[7 Mary 3]

EIN is free! http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/How-to-Apply-for-an-EIN

Yup...I bought a shelf LLC then got an EIN for it and then when we moved put my new phone, internet, TV and heating in it for privacy purposes. Didn't need to do a credit check either. Im sure it helps I live in a zip code with rich folks though.

So far I still dont pop on the usual internet people finders so money well spent.....some other OPSEC things help to.

[jiminvegas]

Small business owner for twenty six years and been sued. If you personally do the work (or make a product) or personally supervise the work of another, you are liable. Do like Gabe says and silo your business. Marketing and manufacturing should separated if possible. Don't let them cut your throat with one slice.

I'll be starting a business this year that has manufacturing and services could you please tell me a little more about why you want them sepperated and how you do it? Feel free to PM me if you want so we don't hijack this thread.

[jesmith]

I'll be starting a business this year that has manufacturing and services could you please tell me a little more about why you want them sepperated and how you do it? Feel free to PM me if you want so we don't hijack this thread.

I'll use Gabe for an example. One Source Tactical sells tier one goods from numerous manufacturers. If Gabe comes up with a great idea for a widget he wants to sell, he outsources that to a manufacturer - which may or may not be affiliated with Gabe. If the part is defective, the liability lies with the manufacturer, not the distributor. So profit made (in this case by OST) would be safe from liability.

There is a lot more to it that I won't go into detail over. Suffice it to say - what works for Gabe will probably not work for you. The trick is coming up with your own secret sauce that puts you ahead of the rest.

[Dr_Dave]

My understanding is that perhaps the most important thing you can do is to make sure your personal funds and your business funds are completely separated. As in separate accounts. And never commingled.

The IRS charges something like $125 for an EIN number for a business.
ein is free. Just got a few in December