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  #11  
Old 11-10-2007, 10:35 AM
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landscaper22 landscaper22 is offline
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I see what you are saying, but if you are a sole proprietor, your business profit is your salary....I don't pay myself a salary. Am I missing something somewhere? My personal taxable income is my business profit. I guess that brings up a good point though. You can't really compare an incorporated business to a sole proprietor. Maybe I should of just asked Sole Ps this question. Sorry for the confusion. But am I still off base somewhere with what I'm saying.

I am greatful for the input though...I'm just not really sure what I'm missing here.
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  #12  
Old 11-10-2007, 11:18 AM
haybaler haybaler is offline
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Quote:
Originally Posted by FCPWLLC View Post
These guys are just trying to show you your error in business math. If you didn't include your salary in those numbers, then you really aren't at 59% pm. Since we don't know your gross, I'll just use the $100k as example gross and the mentioned $55k for a salary. With those numbers... you'd be at 4%. after subtracting your $55k salary. Knowing this will help you to adjust pricing or expense management.

Hope that helps.
you guys are all wrong, give the guy a break. he's just a little sole proprietor, his salary and company profit is all in the same. and you can't just pick a salary out of a hat and pay yourself that and hope the company has enough money to stay afloat.
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  #13  
Old 11-10-2007, 11:49 AM
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Quote:
Originally Posted by haybaler View Post
you guys are all wrong, give the guy a break. he's just a little sole proprietor, his salary and company profit is all in the same. and you can't just pick a salary out of a hat and pay yourself that and hope the company has enough money to stay afloat.

Thanks! I guess. I am a sole proprieor...How little, I don't know. I am stretched past my limit. That is because of lack of good help. I guess (I know) I am very particular about my work and most of these people I hire just don't even come close to where they need to be with quality, speed, etc..They think they are doing me a favor by showing up. So I will continue to be a little sole proprietor until I get the quality help I need.

I Will incorporate once my accountant says it is time to do so. But these guys that gross 100k or a little more each year are not really doing themselves any justice by incorporating. You incorporate to 1) seperate yourself from the business for liability issues 2) tax benefit. If you are running several crews it makes sense to protect yourself from the business. You don't want to lose your personal property because of something crazy your employees may do. If you can pay yourself a nice salary and still have a large profit left after doing so then it is time to incorporate for tax purposes. Just because you are a sole doesn't mean you gross 20k and profit 8k every year.

Last edited by landscaper22; 11-10-2007 at 11:59 AM.
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  #14  
Old 11-10-2007, 12:06 PM
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landscaper22 landscaper22 is offline
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Sorry on some of my spelling errors...
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  #15  
Old 11-10-2007, 04:31 PM
haybaler haybaler is offline
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the tax and liability issue is separate. you can be an LLC for 500 (may very by state) per year and protect all your personal assets. giving yourself a paycheck (salary) is a lot more paperwork and little or big tax savings depending on your situation. you wouldn't incorporate yourself with less than a million in revenue yearly. You asked a good question and got a lot of bad answers. if you count your pay in your expences, than you can make that number look like anything you want. there's to many variables (location, economy, years in business just to name a few) to come up with a set number. The important thing is to set a budget for all your personal expenses that you can live with and then set a budget and goal for your business, add that up and that will be what you need to make, anything beyond that put in a IRA. you need to put enough money back into your business to keep expanding OR to just maintain and keep replacing equipment. It's good to hear other peoples %'s but don't make that your goal just because, especially without knowing what's behind those numbers.
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  #16  
Old 11-10-2007, 05:16 PM
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I am going to disagree with having to gross more than a million a year before incorporating. Also incorporating or a LLC doesnt protect all your assets as well as some would like to believe. As the sole owner of any company, you are still held responsible for the actions of that company. Incorporateing and being the sole share holder of a company means you are still the one responsible for that company, including property damages, and financial responsibility. True your company assets might be the first to go, but you are still responsible for any remaining liabilities.

Before considering anybodies advise here, check with a CPA first.
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  #17  
Old 11-10-2007, 06:51 PM
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Quote:
Originally Posted by muddstopper View Post
I am going to disagree with having to gross more than a million a year before incorporating. Also incorporating or a LLC doesnt protect all your assets as well as some would like to believe. As the sole owner of any company, you are still held responsible for the actions of that company. Incorporateing and being the sole share holder of a company means you are still the one responsible for that company, including property damages, and financial responsibility. True your company assets might be the first to go, but you are still responsible for any remaining liabilities.

Before considering anybodies advise here, check with a CPA first.
Well said...

1- I too think it is worth incorporating for much less than one million. There is no magic number at which to incorporate. But, I know a guy who has been in business 14 years, his gross is only about 45-50k per year and he is incorporated. There is no advantage to this....

2- You are also right on the money with still being responsible. INC and LLC both offer protection, but it is not the protection most people think it is. You are in fact still responsible for your own actions. If you personally screw up a person can certainly sue you personally. If your employees do something crazy like run over a kid in the drive way with the trailer, then you are still responsible, but generally you can only be sued for your business assets. You are still toast so to speak. You may be able to keep your house, and personal things. But if your business is in financial ruins, you have no income any more..

3- I do realize that a profit margin is really more of a percent or number that can be effected by so many variables. I guess what I was really wanting to know is, regardless of wether you are incorporated or not, and not counting your personal salary, how are your numbers looking? What are your basic expenses in relation to your gross. Again incorporated businesses, like DFW for instance, don't include the $200,000 per year salary you get from the business (just joking DFW, although it may be true!: I don't even know if you are incorpated or not.) I am trying to see how the profit (as a percentage of gross) for the smaller companies stack up to those of the larger LCOs...Is that clear at all, or am I still confusing people?
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  #18  
Old 11-10-2007, 07:14 PM
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Quote:
Originally Posted by landscaper22 View Post
That is after paying all my bills. Well I don't pay myself a salary. The profit is my salary. I know it is high, and I can hardly believe it. Last year it was in the lower 40 percentile. But I have had very little help this year, so salaries were low. And yes I have taken a beating working with very little help. I have taken out for all salaries, ins, payroll, materials, even mileage, all expensies. I have no reason to make that number up. I'm sure it will not happen again, but I'm pleased. (well the year is not over yet either)
Two years ago I bought a truck, and only showed a $3000 profit for the year. Last year I didn't have as many major expenses, but did buy a lot of equipment. Also I had two employees last year vs. one this year. This year I have only spent around $1500 on equpment.


WRONG.....you CANNOT include your pay in your profit...that's BUSINESS 101...

profit is what is left after ALL salaries, and other expenses are paid....you should be paying yourself a salary.. or do you work for free?

this is why so many businesses fail.. poor understanding of how financial of a business work.

you will NEVER be able to accurately determine if your business is making money if you do not pay yourself a set salary. Then at the end of the year, see how much money is left. The remaining money is your profit. You can take the profit as a dividend or reinvest it into the business.
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  #19  
Old 11-10-2007, 07:18 PM
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Quote:
Originally Posted by haybaler View Post
you guys are all wrong, give the guy a break. he's just a little sole proprietor, his salary and company profit is all in the same. and you can't just pick a salary out of a hat and pay yourself that and hope the company has enough money to stay afloat.
that is exactly what you are supposed to do. This is the only gauge as to the financial health of your business.

set a realistic salary for yourself. I
owner salary and profit are NOT the same thing. If you think they are then you will never be successful at business. By acting like your salary is whatever is left after your raw expenses, then you are acting like a subcontractor and not a business owner.
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  #20  
Old 11-10-2007, 07:25 PM
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you cannot compare large companies and small companies numbers if the numbers include different expenses. You cannot compare the small sole proprietor LCO to a larger company if the large company profit is after all salaries and the small company does not include these figures....

it is not apples to apples.


as for the incorporation question. any LCO would benefit from at least an LLC.
we have been incorporated since the beginning.

If you are sued, then only the financials of the business can be taken.
YOU can always start a new business. you will still have your personal possessions.
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