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  #1  
Old 07-28-2002, 04:31 PM
Turtle II Turtle II is offline
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Join Date: Jul 2002
Location: North Carolina
Posts: 151
Business structure / Legal Advice

Hope your all enjoying the weekend!!!


Although I am sure I'll wind up seeing a lawyer over this one I am courious to hear what all you guys out there think / did for your own sistuation. (espically if you're operating in NC)


With a "Sole Proprietorship" you are 100% responsible for the debts of your company/ business.

With an "inc." OR "corporation" it states that,

"Personal assets are protected from business liability".

So in laymens terms, does this mean that if I incorporate---and am sued for some crazy amount beyond the insurance policy coverage---I would have to sell all the bussiness equipnment and desolve the business---but that my home and my personal assetts / land, vechicles, etc.... would be protected. They would be seperate from the business.....

But if you're a sole propritor, you could loose your home and every single thing you own???

I am really struggling with this one. I know there are many out there who dont even operate as a business and just work for tax free money---but I would really appericate to hear from some guys who have set up business' and hear your thoughts, opinions, etc......

Thanks,

Last edited by Turtle II; 07-28-2002 at 04:37 PM.
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  #2  
Old 07-28-2002, 10:28 PM
Turtle II Turtle II is offline
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Join Date: Jul 2002
Location: North Carolina
Posts: 151
What's your Thoughts???

J. Lewis, fellow Lawn site addicts,

Whats your take on my original post here on this one???

Jim, your thread on the employes being "sub-contractors" was great advice.....I need some info. from you guys out there on this.

How do lawn care operators in the buizz build that "fire wall" to keep from being sued for everything???


Appericatre any info,

Last edited by Turtle II; 07-28-2002 at 10:33 PM.
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  #3  
Old 07-29-2002, 04:39 PM
Turtle II Turtle II is offline
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Join Date: Jul 2002
Location: North Carolina
Posts: 151
WoW

WoW , no one has touched this one. No even one peice of advice

Either I have already asked to many stupid questions on here,

or,

everyone is a sole proprietor and could loose it if the Big one happened to them.

I guess I am wondering if going through the red tape and tax headaches of being an "inc" is worth it in this buizz. It would suck to loose your home and everything. The world is still "sue crazy" in my opinion.....

Have a good one
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  #4  
Old 07-29-2002, 05:36 PM
Russo Russo is offline
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Join Date: Mar 2002
Location: Tennessee
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Turtle,

I have discussed with my accountant on several occassions. I myself am a sole proprietor. Here is how I understand it.

Sole Prop - If YOU cause damage ( car accident, etc ), someone can sue your company AND they can sue you personally.

Incorperated - Exact same thing EXCEPT that if an EMPLOYEE of yours causes damage, someone can sue your company but only can sue the employee personally.

If you are the only labor working, than incorperating won't make a difference as far as liability. And as I understand it, will increase your tax burden ( at least in my state ) in terms of corporate taxes. It is for these reasons I will remain a sole prop until I hire employees.

I welcome others to contribute if I am off target somewhere, but I studied this topic at length with my accountant and other professionals and this is how I understand it to be.

Jim, where are ya?
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  #5  
Old 07-30-2002, 04:31 PM
Joel B. Joel B. is offline
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Join Date: Jun 2002
Location: MN
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Turtle,

We recently went through the same decision process. We did research with the Minnesota Small Business Association and the Secretary of State along with a Small Business Tax book. We decided to organize as an LLC (limited liability company). It cost about $200 for all the filing fees. Here is why:

1. An LLC is taxed like a sole proprietorship (income and losses pass directly to the organizers without being taxed first). You can use Schedule C to the 1040.

2. An LLC is a separate entity, which MAY offer some personal liability protection (not yet tested in court and will not cover personal negligence). We also got business insurance, but for $200 one-time filing fees, we felt the distance between us and the business was worth it -- who knows?

I don't know if North Carolina has this form of business ownership (not all States do), but an alternative that is about the same for taxes and liability is a Subchapter S Corporation. The biggest difference is that you are a corp instead of a company, and you have to file corporate returns (but you don't get taxed at the corporate level). The corporate income or loss transfers over to your personal returns and the S corp cannot retain earnings.

Remember whatever advice you get from professionals is from their specific area of expertise. Best to understand most of it yourself so you can make a good decision OVERALL.

Good Luck,

Joel's wife (Bridget)
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  #6  
Old 07-30-2002, 09:49 PM
AL Inc AL Inc is offline
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Location: Long Island, NY
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Turtle-I was in the same boat when I started. I decided (without much guidance) to go with the sole proprietorship. My business was just me with 1 part timer. I was 22, single, and lived with mom and dad. I didn't have anything, so really had nothing to lose. I set the business up, got insurance, W. comp, pesticide applicators license, consumer affairs license, etc. Long story short, I ended up creating a subchapter "S" corporation a year later.
You didn't mention whether you had plans to grow or remain a solo operator. You can get along as a solo sole proprietor, but I feel it is risky, given the way everybody wants to sue for some of the most ridiculous things. Enter empoyees into the mix and nearly anything can happen. If I had to do it again, I would incorporate immediately and save the extra hassle and paperwork of doing it down the road. Good luck to you, Mike
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  #7  
Old 07-31-2002, 02:34 PM
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Potomac Lawns Inc. Potomac Lawns Inc. is offline
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Mine is an S corp and i have ben happy so far it is almost like an llc but just a little different.
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  #8  
Old 07-31-2002, 11:24 PM
Sean Adams Sean Adams is offline
 
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Location: Pennsylvania
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Turtle....

Your post as far as how it is understood is correct. In a nutshell, sole prop is easier but eventually riskier.... INC can be an expense and a hassle, but much safer the further you go with this business. Some say better to be safe than sorry...others want Uncle Sam to see as little as possible. As you said....the best advice is to seek the guidance of a small business attorney familiar with these situations. Best of Luck.
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Old 08-01-2002, 10:44 AM
LawnLad LawnLad is offline
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The decision to incorporate comes from two different prospectives - depending on your needs will determine if it's right for you.

From an accounting stand point there are tax advantages that you accountant will be able to share with you. First and foremost is the savings on social security taxes that you do not have to pay if you take a draw above and beyond your salary.

From a legal stand point the protection an LLC or S Corp gives you is an added layer. As mentioned previously it doesn't protect you against your own negligence.

Remember that anyone can sue you for anything they want. You may be able to get a case dismissed due to frivilous claims - but you are still inconvenienced by the suit and relative expense.

Assuming you're making enough money to justify the added expense of incorporating (which isn't that much), and with the proper insurance and some common sense while you're out there working - you should be able to protect yourself adequately.

There are no guarantees that you won't be sued or something horrible might not happen. This is why you have to determine your own threshold for exposure to risk and decide how much you want to pay to protect yourself from the risk.
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  #10  
Old 08-07-2002, 06:44 AM
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heygrassman heygrassman is offline
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I was fortunate to get a "free consult" on this from an Atty. Granted this is Ohio but if I remember correctly LLC will provide you protection from liability up to the extent of the initial investment in the company. Initial investment dollars and equipment and moneys and equipment loaned (loan with payback criteria, etc not loan = borrowed to maybe return someday) to the business by the owner are two totally different sources of capital/assets. There are definate tax benefits to an LLC but there are costs associated.

Inc. in Ohio is a pain, you have to have a board, you are supposed to have meetings with minutes, bylaws, double taxation on profits,.. arrgh...

Highly recommend seeking the advice of an atty.

jf
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