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Sole proprietor or Corp??

Discussion in 'Starting a Lawn Care Business' started by CleanCuts101, Mar 15, 2013.

  1. 205mx

    205mx LawnSite Silver Member
    Posts: 2,339

    Guy, this is bad advice. Don't listen to this.
    Big difference in a corporation that your describing, and the one you are trying to describe. Do some research on: C Corp, S-Corp, Sole Proprietor, and LLC filing as a corp vs filing as a sole prop.

    Also, the liability protection is NOT true for single member LLC's. It might exist but when they come after a company, they come down the chain. First stop is the members. If your the only member.... Just have a solid liability policy.

    To answer the question:
    Personally I'd do this:
    Sole proprietor. Get online and reserve the corporate name you'd like to go with. Then file a DBA for that name under yourself as a sole prop. In a year or two when the money isn't an issue, use the name you reserved and file your LLC. Then a few years after that, depending on tax benefits, you may look in to an s-corp. At this point, you can simply change the type of Entity from an LLC to a corporation, preferably S-Corp
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    Last edited: Mar 15, 2013
  2. CleanCuts101

    CleanCuts101 LawnSite Member
    from il
    Posts: 16

    Yeah that's what I was thinking now because I am new to the business end of this as a sole proprietor how should I pay myself because I know its different from being a corp like how do I know how much taxes to take out of what I personally make?
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  3. 205mx

    205mx LawnSite Silver Member
    Posts: 2,339

    First You should buy some Kotex because you have a serious period problem!

    Just kidding dude. Right now id just take all your profits home minus some equipment savings. I'll get back to you.,. About to go to dinner
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  4. CleanCuts101

    CleanCuts101 LawnSite Member
    from il
    Posts: 16

    Lol alright thanks for the advice
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  5. 205mx

    205mx LawnSite Silver Member
    Posts: 2,339

    For taxes, on PROFIT, save what you estimate your effective tax rate will be. 9-12% Then save for SE tax. ~15% 20-25% is a good rule of thumb.

    Are you going full time?
    Are you planning to grow?
    Do you have another job?
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  6. CleanCuts101

    CleanCuts101 LawnSite Member
    from il
    Posts: 16

    I do plan on going full time right now I don't have accounts for a full 40+ hour workweek im gaining accounts weekly though and no I actually quit where I was working to be dedicated to this.
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  7. 205mx

    205mx LawnSite Silver Member
    Posts: 2,339

    It's trick you have to have numbers that work for you. It's harder than you think.
    For right now I'd take 60 cents of every dollar you earn and put aside for fuel, repairs, tools, minor equipment purchases, future advertisement, earl for equipment, general expenses, costs of goods such as mulch, etc...

    Keep track of your mialage for tax time.

    With that other 40%, save 25% of that 40% for federal income taxes and SE tax.

    This leaves you with 30 cents left of every dollar to pay bills and eat.

    That's IF your operating costs are as low as 60%.

    Big IF. You HAVE to keep a good eye on your numbers.

    Their are more expenses and more thi gs to save for. Example: you may want to save 10% for three years to purchase a new mower or truck.

    Examples: insurance costs, state income taxes, sales taxes.

    If you have questions please ask.
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  8. CL&T

    CL&T LawnSite Senior Member
    Posts: 493

    That's a tough question to answer for the first year. As a sole proprietor your pay is everything left over after paying for the business expenses- gasoline, insurance, equipment, employees, etc. This is your gross profit. On that amount you will pay your usual income taxes plus a self employment tax which is really social security (SSI). Unlike a W2 employee where the company picks up half the amount and you pay the other half, when you are self employed you pay the full amount. Other factors effect the taxes you pay such as if you are married and filing jointly. Any of her excess witholding gets applied towards paying your taxes.

    For the first year then I would probably put aside one third of your gross profit for taxes just to be safe on April 15. After the first year and after you or your accountant does your taxes then you'll know what you pay because you have to pay estimated taxes quarterly. The IRS and the state wants you to have at least what you paid the year before paid to them by April 15. So each quarterly payment will be 1/4 of what you paid the year before. If you find yourself making more money or making less, the estimated payments can be adjusted accordingly.
     
  9. 205mx

    205mx LawnSite Silver Member
    Posts: 2,339

    1/3 of his GROSS?
    That seems like a lot considering his print margins will likely be 20-45%
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  10. sildoc

    sildoc LawnSite Silver Member
    Posts: 2,925

    I Would agree however at the end of the year and Uncle Sam being paid off you have enough for your first quarterly and a nice little bonus to be had. I would rather error on the high side than OWE Uncle Sam and pay his interest rates.
     

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