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Discussion in 'Starting a Lawn Care Business' started by chevyman1, Jan 12, 2004.
why should I chose one or the other this spring for my side company?
Chevyman, as I understand it, if you were not an LLC and you were to be sued you could be held liable for whatever the amount of the judgement is in excess of your insurance policy limits. If you carry 1 mil in insurance but for some reason there was a judgement against your for 1.2 mil you are responsible personally for the .2 mil. As an LLC, the liability is limited and capped at the amount of insurance you carry. Thats how my CPA 'splained it last week to me as I contemplated the same issue. hope that helps!
always protect yourself from your companies. Incorporation is the way to go. An LLC would be fine for a company with little risk exposure, however landscaping uses dangerous equipment, and pesticides. That means high risk.
The corporate protection or corporate umbrella as my old tax attorney use to refer to it isnt full proof. A bit of background is in order my lawyer was a tax lawyer for 30 years before that he worked for over a decade as an IRS field agent. And what he did drill into my head was the veil of protection was only good as long as you treat a corporation as such. What that means is this when you sign for something tac on your position in our cases president. You need some sort of corporate mins. Do you cut checks out of your personal account or do you some times directly deposit business income into your personal account.
Where this becomes important and theres a lot more to this is when you end up in court either being sued or for taxes they can opt to attack your umbrella. Ummmm your honor Mr. Scaper here has not ever treated this venture as a corporation and he in fact doesnt have one its just on paper. You get the nightmare un-folding in front of you. Any ways if that is ruled you do not in fact follow corporate laws you could infact lose your protecting and despite having the fancy title they could infact go after you Personally. As for how to organize your business I would recommend you still incorporate just make sure you run it as a real corporation most go LLC I happen to have an S corp. but they are pretty similar.
And don't forget as a corporation you must have meetings with the board (even if just you and partner or wife). You must also keep minutes of these said meetings. My understanding was at the very least, 2 per year.
Just my limited knowledge. Advice from my CPA was to carry adequate insurance and if a catastrophic event happened, file bankruptcy............
My business is an LLC. My accountant stressed that I keep the business seperated from personal finances.Use seperate bank accounts and credit cards for business purposes. If you don't do this and get sued it makes it easier for a lawyer to sue you for more than what your insurance covers.
thanks, I will have to do that
If you're a solo operator, being a corp will only save you some self employment taxes. If a mishap should happen a attorney will go where the money is. You just cannot hide behind a corp if you are involved in the mishap. The corp and YOU will be sued. However if you are a corp and a helper is involved in a mishap you are protected to a rather high degree. Think about it.
A corporate sheild is fairly straightforward as far as completely seperating you from your business activities. If your business is sued and you are incorporated 99% of the time they cannot touch your personal assests. On the contrary you aslo cannot transfer ownership or sell business assets before judgment is rendered on a case in hopes to avoid forfeiting them in settlement. The only area the corporate sheild is pierced on a frequent basis is in cases of gross tax negligence and evasion. As far as liability involving accidents you are covered. The L.L.C. advantage is that you do not have to have stock and a board of directors but still get the corporate sheild advantage. And I pretty sure the other advantage with L.L.C. is that profits is only taxed once, where as in a Corporation profit is taxed twice, when the business sees a profit and when you in turn recieve that profit from the business.