need some help here please, sole prop confusion

Discussion in 'Business Operations' started by jbannick18, Sep 17, 2007.

  1. jbannick18

    jbannick18 LawnSite Senior Member
    Posts: 490

    So i've been reading and I think I'm just going to start out as a sole proprietorship. Now my question is. If I open a business account and have my personal checkings and someone rights me a personal checks, will I be held responsible for paying the taxes even though it was a personal check? And if that is so then the only way to go around that would be cold hard cash. Thanks
  2. topsites

    topsites LawnSite Fanatic
    Posts: 21,653

    Depends what the check is for ...

    First you will want to get a dba account so it really doesn't matter if the customer writes the check to you or the company. And you deposit all monies paid to you for work and services in your business account, and you pay taxes on the profit and so on.

    Now if your parents write you a check as a Xmas gift, that's a different story, that goes straight into your personal checking account.

    Beyond this simple explanation you will want to start looking into getting the services of an accountant.
  3. SwihartServices

    SwihartServices LawnSite Member
    Posts: 154

    The worst thing you can do is be a sole prop. All it takes is one little screw up and you lose everything. Just do yourself a favor and set up an LLC. You can do it on for pretty cheep.
  4. SpruceLandscape

    SpruceLandscape LawnSite Senior Member
    from ohio
    Posts: 502

    I'm set up as a sole prop. and have done exactly what Topsites stated without any problems. I have an accountant that I run my taxes through and she agrees that for my situation staying a sole prop. makes the most amount of sense. I wouldn't consider going to an LLC or INC. untill I have regular full time employees working for me. This also isn't my full time job either, so you have to take that into consideration. If you get a good General business liability account (mine runs about $800 per year) for $1 million/$2 million and make sure your auto insurance is set up to cover you commercially as well, you should be just fine.

    Not to stray from the subject, but I also have gone to having 3 different credit lines for the business. One is strictly for fuel for the truck and mowers (also is a rewards card), one is for office supplies and equipment purchases, and one is for bulk materials and plants (or anything that is considered an expense on a job site). At the end of the year it makes it a cinch to determine your write off's and keep records without having to thumb through a million receipts by hand!
  5. SwihartServices

    SwihartServices LawnSite Member
    Posts: 154

    There is no reason not to set up an LLC even if you don't do it full time. What if you hit a rock with you blades and kill someone. Your liability insurance is only going to go so far.
  6. SpruceLandscape

    SpruceLandscape LawnSite Senior Member
    from ohio
    Posts: 502

    if you want to worry about something that extreme, being an LLC might save your house, but its not going to keep you out of jail. And at that point, it won't matter if you have a house because you won't be able to afford to keep it. Yes... an LLC gives you more protection, but it isn't necessary unless you have a serious amount of assets that you need to protect. Even at that, an LLC won't protect you as much as just incorporating all the way.
    This is all in a nutshell anyways and anyway you look at it has its benefits and pitfalls, so it depends on your personal situation. Best advice is to talk to your accountant and your insurance agent, do the numbers and see which way works out best for you.
    My opinion though... if you are just starting out, stay a sole prop. and keep it simple to see if this is something you want to continue. Just my .02
  7. SwihartServices

    SwihartServices LawnSite Member
    Posts: 154

    There really are no pitfalls to an LLC. It's the same as an s corp without the restrictions. It has the same protections. It's extremely easy and cheep to form and maintain. It's only 139 dollars one time on You do your taxes the same way as a sole prop or partnership. It has infinite flexibility and could save your a$$.
    You can even lease your equipment to the LLC from your sole prop that way they can't even get to your equipment.
  8. Maitland Man

    Maitland Man LawnSite Member
    Posts: 175

    How would being a sole prop. put you in jail!?!??? It wouldn't. The LLC just keeps your personal assets from being attacked. Jail????? That'd only happen if YOU, yourself, not employees, purposely tried hurting someone or break the law in another way. In another words...criminal infraction, and that is what equals jail time, not the structure of your business. Don't try and convince this guy that he'd go to jail for a mistake someone does in his company because he doesn't have his business under a corp set-up. That is just not true.

    Please explain. Do you know someone that has been put in jail that was sole prop, when in fact if he was a LLC he would not have?

    I'm Incorporated with up to 10 employees at any one time, but I started full time as a sole prop for the first 6 years of business.

    Just wondering..........

  9. SpruceLandscape

    SpruceLandscape LawnSite Senior Member
    from ohio
    Posts: 502

    Dennis... You are taking what I said out of context, or, maybe I just didn't do a very good job of conveying my message. I am a proponent of him staying a sole prop., as I am myself. I was just trying to convey that at this stage unless he is already a millionaire or has tons of assets, incorporating is not going to protect him any more than just having a really good insurance policy and staying a sole prop. to keep everything simple until he decides this is something he wants to continue doing. I was dramatizing the going to jail thing because someone else brought up "what if you kill someone" trying to make a case for him going right into an LLC. At this point it sounds as if he doesn't have any employees and will probably be working by himself for the majority of the time. He just wanted to know if there were any advantages or disadvantages of doing it one way or the other.
    Did that help any??
  10. dutchhook

    dutchhook LawnSite Member
    Posts: 93

    I don't want to get in the middle of different views. I noticed you had 122 posts online, so I assume this is going to be a good business for you. Why else spend so much time learning on LawnSite??
    I've started a dozen businesses. I've had businesses with 2 employees and businesses with 300 If this is going to be a full time business, it really makes sense to incorporate or do an LLC. It's really cheap, and there is no doubt it provides a layer of protection,you don't need to be a millionaire. Let's use a simple example. Like Swiheart says above, a customer says a rock goes through their plate glass window. You disagree, Conciliation court is setup to lean towards the customer. A customer could sue you personally, but if they know you as "Mean and Green Inc., aren't they more likely to sue the corporation? Now think about applying for credit for a truck. Do you have a better chance getting approved WITH the pending lawsuit, or court case in your name, or a better chance applying personally for that truck with any loose ends or claims tied to a corporation?
    Best of Luck!

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