DBA, LLC, or S-Corp

Discussion in 'Starting a Lawn Care Business' started by Trevoryard, Oct 25, 2009.

  1. Trevoryard

    Trevoryard LawnSite Member
    Posts: 6

    Hi All. I am a solo operator and sub-contract very little work out. I have 75% residential and 25% commercial accounts and wonder if I need to become an LLC or S-Corp. I am dba now and have excellent insurance protection and just dont see the need to spend money on becoming an llc or s corp. Are there any tax breaks or anything enticing besides the protection of personal assets?
  2. rob7233

    rob7233 LawnSite Senior Member
    Posts: 861

    As a Sole prop you and the business are the same along with any assests or liabilities. This also goes for liability exposure. As an LLC you are no longer the DBA company but the company becomes a separate entity which may apply for it's own credit etc. Your SS # is no longer the indentifier for the Federal government. The sub S is an additional option as to how you want to disclare taxes and write off. You really don't get the benefits or the added layer of protection from liability as a single member LLC. Do a google search for services to get one set up and some more help.
  3. Uranus

    Uranus LawnSite Bronze Member
    from Mass
    Posts: 1,624

  4. mowerbrad

    mowerbrad LawnSite Fanatic
    Posts: 6,273

    There are plenty of threads around this site that will help you with a few of your questions and at least give you a good idea of what might be best for you.

    Like Rob said, as a DBA your personal assets and business assets become one in the same. With an LLC, your personal and business assets become separated. Being an LLC will help big time if your company is ever sued. In that situation without an LLC your personal assets could be at risk if your insurance doesn't cover everything. So that means you could lose your house, your business, your "toys"...everything! But with an LLC, the most you could lose is your business, so you would still have a house and all your things, just no more business. Typically though, if you have a $1mil insurance policy you won't really have to worry about anything, but if something were to cost you more than $1mil, your personal life is protected.

    I highly suggest that you make an appointment with your accountant or with your financial lawyer and talk to them about this. They would know much better than everyone on here.
  5. Ruben Rocha

    Ruben Rocha LawnSite Senior Member
    Posts: 577

    Agree with all of the above.
    DBA may be the least cost up front. But long term is another issue with liability.
    The biggest change you will see changing to a corp. will be you become a employee so there is more forms to submit per quarter.
    As far as changing I think may find you may need to personally sign for credit for the company until the company has a credit rating.
  6. BlueDog Lawn&Home

    BlueDog Lawn&Home LawnSite Member
    Posts: 5

    As I am also a licensed insurance agent, the protection from suit when you are setup as dba is the concern. A $1 million liability policy per occurrence will be more than you would ever need. However, you can go for one more layer of protection by purchasing a commercial umbrella policy, which is relatively cheap. By purchasing a $1 million dollar umbrella, this policy would protect you/your dba business/all your personal assets by providing another $1 million in liablity if you are sued, exhaust your limits on your commercial general liability policy, and are still in need of additonal coverage. i.e.=this umbrella will not provide any protection until the limits ofyour liability policy are exhausted.

    Depending on the size of your business(obviously the larger your gross income is the more liability coverage costs as you become a higher risk) a commercial umbrella can cost anywhere from $300-$1000(if you are paying $1000/year for a commercial umbrella policy, you will not be sweating any longer as you will be making $1,000,000 + per year).

    Hope this helps.
  7. rob7233

    rob7233 LawnSite Senior Member
    Posts: 861

    Hey BlueDog can you adress this question?

    I have heard from an industry consultant or two that having such coverage(GL & Umbrella) can and would likely make you a target for a lawsuit if a lawyer was asked to look into the company's assets in consideration to go forward.

    Do you think that there is any real truth to that?

    I personally think it's a crock but I have been told some horror stories.
    I look at it as Risk Vs. Gain.
  8. BlueDog Lawn&Home

    BlueDog Lawn&Home LawnSite Member
    Posts: 5

    I think a lawyer is going to look anywhere for a $$$. Having the coverage can only protect you. I would agree with you in fact that it is a crock of sheeeet! Get the coverage, protect yourself, then let the lawyers fight it out amoung themselves.

    Hope this helps.
  9. JayN09

    JayN09 LawnSite Member
    Posts: 6

    I was just reading the new edition of my policy contract (looking for changes or exclusions that I should make note of) and thought the following might be helpful to you: "If legal action is taken in a claim again you, we have the right to conduct and control a defense at our expense..." (in the previous, you referred to my company and "we" replied to my insurance company). I imagine my insurance company can afford more lawyers for longer than me, so that may convince another lawyer that it ain't worth his time.

    My company is set up as an LLC. It cost me $130 (I think) and I filed on my own. The LLC is setup as a passthrough. Tax time, I fill out Form 1065 (a standard Partnership form) and then pass the Schedule K's on to me and my business partner to include in our 1040. It's quite simple. We used Quicken for the first two years of business. Now we're bigger and have more money moving around, so we have an account.

    Hope that helps.
  10. LouisianaLawnboy

    LouisianaLawnboy LawnSite Silver Member
    Posts: 2,199

    Llc. . . . . . .

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