I think that my firm's business structure is the best. Of course, I understand 'best' is subjective, so I would like to hear the opinions of others on this.
I own a microbusiness. (The Business.Gov site has an excellent article on what a microbusiness is here)
It is a Single Member LLC. I have at any given time, anywhere from 2 -4 Independent Contractors. Each of these contractors only works part-time. I have checked the IRS' guidelines for determining whether a worker is an IC or an Employee, and we're good there.
My wife, while not a Partner, is an appointed officer (Chief Operating Officer) in our Operating Agreement.
We are a virtual company, which means we don't have a physical location or office. So overhead is very low, freeing up more funds for marketing and advertising, which I love.
I think this is a tremendously flexible, yet recession-resistant and resilient, form of business structure. It allows me additional income, and I can still work a FT job if I so choose (what former NYTimes blogger/writer, Marci Alboher, calls being a 'slasher' or the '/career movement,' which I've written about on this forum here.)
As a SMLLC, for tax purposes, we are a 'disregarded entity'. Means: the LLC doesn't have to file a separate tax return. I simply attach a Schedule C to my personal income tax return, and it's done. My accountant's fees are a little high, but it's quick and easy and painless and much less stress than filing a separate LLC return or filing as a corporation, IMHO.
And, since I don't hire 'employees' in the legal sense, I don't have to pay employment taxes and figure out all the regulations governing employees (there are a lot of them)
As far as Federal, State and County regulations, an SMLLC is pretty straightforward. All I need to do is
file an Operating Agreement with the state
file an Annual Report ($50 in NJ)
As an SMLLC isn't a sole proprietorship in terms of registration laws, I don't have to pay an extra fee to file a county d/b/a fictitious or trade name application to operate as 'Gnosis Arts Multimedia Communications LLC'. (At least, I don't think so; correct me if I'm wrong here but I did the research and that's what it seems to suggest).
I just think that theis form of business structure: a virtual SMLLC, microbusiness, which can hire contractors and appoint officers without having to make them employees; offers the best of all possible worlds - at least for the entrepreneur who wants to have the legitimacy of a business designation and operations, without all the complex governmental machinery that can be daunting, confusing and discouraging for many first-time, want-to-be, business owners.
But what do you think? What is the best business entity, in your opinion?
Wishing your company to grow fast then!
You are most welcome and I hope we cross virtual paths some day. By the way, my services do not include tax preparation. CPAs are really quite specialized and if you want someone good at taxes, find one that does only taxes and has been for over 25 years.
I do the same on the Controlling side (financial accounting, internal financials, external financials, planning, forecasting, margin analysis, etc) - you know, just what a controller in a large company would do.
If, in the meantime, you need to do any of that yourself, please remember I also have financial templates. They could save you some time!
All my best!
Lucy
FINANCIALS for you
financialsforyou.com
---This post was edited to remove a commercial link. Read our discussion policies for more Community best practices.
petrosianii | Window Shopper |
3/10/2010 - 11:09 am
@Lucy - A PT Controller! A virtual assistant who is a Controller! What an absolutely MARVELOUS idea for a business!
I just love how the Internet opens up possibilities that would have been difficult - if not impossible - before.
I checked out your website - if we continue to grow (which I have no doubt we will) I may wind up needing services such as yours. I would love to be able to hire someone to just handle all financials - e.g., invoicing, bookkeeping, and taxes.
My goal is to eventually have enough ICs to do almost all the admin/financial work, which will free me to just focus on being the vision person for the firm. Not there yet, but that is the goal.
Thanks, Lucy, for your informative comment.
Yes a good accountant is key. However, if they would abolish the IRS and do a consumption tax, we would all be treated fairly. As it stands now tax cheats like Charlie Rangel and Tim Geithner who are politically connected can skirt our tax laws. But if you or I did what they did, we would be in jail, fined heavily, or both.
Corporations should really only be there to help avoid tort liability, not tax liability. A consumption tax would hep avoid that altogether.
IMHO, LLCs aer usually better corporate entity than C or S corp for a start up.
If you are an international student or Immigrant, LLC are the only choice.
It limits you from having paying tax on multiple entities.
I have my own company, National Furniture Supply LLC nationalfurnituresupply.com
---This post was edited to remove a commercial link. Read our discussion policies for more Community best practices.
In my experience there are two primary considerations when deciding what entity structure to use; protection of assets and tax implications. Within these overiding concerns are many sub considerations such as the laws in your state regarding the protective qualities and tax burdens, the cost of development and maintenance of the different entities and on and on. My best recommendation is to consult with a qualified tax attorney in your local area that specializes in the industry you are in and tell your plans and get recommendations.
It looks to me like you have really done your homework already and are happy with your choice. The other commentors and I totally agree that each business needs to do exactly that - determine the best structure for them.
Each has unique needs and unique owners - their deductions, particular life situations are all different - and no small business is very far from its owners, so it all has to be looked at together.
I always advise my clients to consult a good tax accountant to cover the tax side of things - what will keep my taxes at a minimum, what will allow me to deduct what I need to deduct, etc.
And then I advise them to go to a second tax accountant. I cannot tell you how many times I had to help a client change their legal structure because the second tax accountant gave him a totally different and yet much better direction to go into.
The second thing is the legal side of things. Most people forget about it. You seem to have covered it already to some extent, i'm not sure how far. Again, here I would do the same as with taxes - find two competent business attorneys and visit each to get his thoughts and then decide what's best for you.
You mention that your accountants' fees are high. I don't know specifics, but it could be that he is preparing your financials (on which your Schedule C is based) before he can actually use it to prepare your tax return. If he is a conscientious tax accountant, he would do that. but he will chanrge you for that part of his work. If you gave him a clean set of financials, all you'd pay would be the tax return. You would need to pay someone for the financials, of course, but chances are their hourly rate would be lower than your tax accountant's.
I don't know if you do have an accountant, but one thing is sure - most small businesses have largely neglected this function predominantly because of a great shortage of skilled small business accountants (having a bookkeeper is not enough, although better than nothing), let alone someone who can function as a part-time Controller.
These are things every business needs - small or large - and not knowing your numbers on a monthly basis and not being able to run your business by the numbers (not only sales...) is one of the main reasons behind many small business failures I have seen.
All my best to you!
Lucy
FINANCIALS for You
financialsforyou.com
---This post was edited to remove a commercial link. Read our discussion policies for more Community best practices.
I am an S corp and I am a personal injury lawyer in Los Angeles solo practitioner. It should be good for flow through tax liability purposes for most smaller businesses.
---This post was edited to remove a commercial link. Read our discussion policies for more Community best practices.
In reality, there is no best business entity, just what's best for your current situation. You need to consider so many different factors that it's almost impossible to say; Hey, an LLC is the best type of business entity, you just can't do that. In my opinion, an LLC is perfect for the work-at-home or small business model; the tax part is also seperate. I personally enjoy double taxation with an LLC and having it treated as a C-Corp or S-Corp; again this is due to the nature of my business.
In reality, there is no best business entity, just what's best for your current situation. You need to consider so many different factors that it's almost impossible to say; Hey, an LLC is the best type of business entity, you just can't do that. In my opinion, an LLC is perfect for the work-at-home or small business model; the tax part is also seperate. I personally enjoy double taxation with an LLC and having it treated as a C-Corp or S-Corp; again this is due to the nature of my business.
Thanks, Fireplace Guy, I totall agree. I know there is no one best type of business structure. The forum thread was mainly to spark conversation. I appreciate your comments.
lucy | Creator | 3/10/2010 - 12:23 pm
petrosianii | Window Shopper | 3/10/2010 - 11:09 am
elusive | Creator | 3/10/2010 - 10:24 am
Vipulpratap | Window Shopper | 3/8/2010 - 9:46 am
BrettB | Performer | 3/16/2010 - 5:30 pm
lucy | Creator | 3/9/2010 - 11:45 pm
elusive | Creator | 3/8/2010 - 12:04 am
Fireplace-Guy | Creator | 3/7/2010 - 1:52 am
petrosianii | Window Shopper | 3/7/2010 - 9:49 am
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