Forums: Discussions for entrepreneurs and small business.

First let me say that I haven`t talked to a lawyer about this, as I was hoping I could do everything without paying for legal advice.

I was planning to create an LLC, but in talking to a co-worker yesterday (who has a photography sole proprietorship on the side). He said that he is remaining a sole proprietorship because, after talking with three lawyers, an LLC wouldn`t protect him from being personally sued if, for example, he was on a shoot and someone tripped over his camera bag and got hurt.

He has an insurance policy to cover his equipment in case of damage, and has some liability insurance as part of that.

So, for my business, which would primarily be writing about and doing seminars for fitness education, would I need an LLC for something like that? I won`t have a partner, and plan to avoid having employees, opting instead to contract out work as needed.

Do we have any lawyers in the Community that can answer something like that?

Thanks!

-------------------------

Brian David O`Keefe
The Web Strategy Coach
briandavidokeefe.com

Motionguy,
First of all, if someone was to sue you or your LLC what is the difference? You are still being sued "It`s your business" I think you are misinterpreting the concept of an LLC, An LLC is a Limited Liability Company which means that

A limited liability company (LLC) is a business entity that is a hybrid between a corporation and a limited partnership. As with corporations, the LLC legally exists as a separate entity from its owners. An LLC offers limited liability protection for its members and pass-through taxation of the company’s profits.

Although an income tax return must be completed and filed for the LLC, no tax is paid at the entity level. Instead, the profits or losses of the LLC are “passed-through” to the owners (also called members), who must then report the income or loss on their individual tax returns.


Now in basic English: Although, It does offer you some sord of protection it eveything is still passed on down to you. THE OWNER

Have you ever thought of Simply Incorporating and leaving it at that?
Give or take the paper work for a Corporation is much greater and than for an LLC.
One major reason why I decided to go with an Full Corporation (S Corporation) Is because there are more benefits and Separates my personal life from the business. As long as I keep my minutes, bylaws, and all my legal paperwork in good standing they can not pierce the corporate veil and come after me.



-------------------------

Edgar Monroy
Web Developer / Owner / Consultant
When starting your own business the need to "know-how" is greater than money!
http://www.nuevolution.net

Nuevolution,

Thanks. This shows how much I don`t understand what I`ve read about LLCs. From what I`ve read, it seemed that an LLC offered the exact same liability protection as an S corp, i.e., the same separation from my personal life/finances. It seemed to me that as long as you`re OK with some of restrictions of an LLC, then that would be easier and just as good for liability protection.

I really appreciate this and any other feedback so that I can make the right decision right at the beginning. As much as I`d like to call my business an LLC or corporation, I`ll gladly remain a sole proprietorship for cost savings and ease of paperwork, if it`s safe to do so.

-------------------------

Brian David O`Keefe
The Web Strategy Coach
briandavidokeefe.com

An LLC protects you from personal liability stemming from any business debts or liabilities.  So for example, if you are unable to make a payment on a commercial lease that was made with your LLC, your personal assets would not be at risk.

That being said, there is a difference between shielding your personal assets and "not being sued."  There is nothing stopping anybody from suing you in your personal capacity for any reason at any time.  However, by forming an LLC, you have the ability to have their claim against you individually dismissed based upon your LLC status.

By and large, there is no difference with your limited liability whether you form an LLC or an S-Corporation.  There are, however, other significant and important reasons to choose or the other.


-------------------------


Pepper Law Group, LLC
21 E. High Street, Suite D
Somerville, NJ 08876
informationlaw.com
Now available on DVD!
The Legal Considerations of Starting an Online Business

Nuevolution,

I thought that cut and paste Google answers were frowned upon..

Anyway, you are completely wrong about the corporate veil that an LLC provides for personal asset protection in case of legal action. You also contradicted yourself as the post went on, saying that (a) everything passes down to the owner, yet (b) you have a corporation to keep `them from coming after me`.

Which is it?

The correct answer is (b). You are confusing the passing down of income or loss to the personal tax level versus passing down liability. Income/loss does pass down, in whatever percentages the members of the LLC decide at tax time (and that % split does not have to follow the LLC % ownership), but corporate liabilities - injury to another during the course of business, for instance - do not.

Also, you missed the boat on C-corp versus LLC`s. Both of them separate yoru business versus personal life, and both of them have reporting requirements. Anyway, you can file however you`d like, but I just wanted to clarify soem misinformation. This doesn`t mean that you do great web work; we can`t be good at everything.

Motion Guy, I totally recommend an LLC in your example. In addition to being shielded from personal liability in the course of a business shoot, you also pay taxes on the net income from the business after expenses. In other words, if you show income (or not, although the IRS limits losses on minimal income) and also buy equipment, you can expense the equipment against the income and bring down your net income tax liability. It will still flow down to your personal 1040 on Schedule C, but at least you get a tax break for the startup and continuing expenses. I would imagine those are pretty high for a photog.

LegalZoom.com can help you file for an LLC for under $300, a little more if you need it sooner. This then allows you to open a business checking account, etc.

Hope this helps.


-------------------------

Jeff A. Gregory President, Chief Brand Strategist Brand Counsel, LLC     Branding Brilliance    www.brandcounselllc.com

BrandAlchemy,

Thanks for the clarification. Although perhaps your recommendation will change based on what my business will be (writing and promoting fitness). The photographer was a co-worker of mine. Does that change your recommendation?

What you`ve said is more in line with what I had thought before I started this thread. I understand the pass-through income and taxes, and since I don`t intend to have business debt, I was more interested in protecting my personal assets from a lawsuit against the business.


-------------------------

Brian David O`Keefe
The Web Strategy Coach
briandavidokeefe.com

Brand? That was not cut and paste my man/woman, I don`t know what you are
since I don`t see a picture to associate you with the name. But anyhow, the corporate veil does protects you "the owner from being sued against your personal assets"

BUT....Here is where BEING COMPLIANT is important!
Remember, when they sue your LLC, if the LLC doesn`t have any money the lawyers will try to go after you because thats the way nature works,  and for your information (not googled), there are 26 different ways  that the corporate veil can be  pierced (can you name me 5?)
So the lawyers will try their hardest to see where you`ve gone wrong and then let you have it.
BUT IF YOU ARE COMPLIANT AND ALL YOUR PAPERWORK IS UP TO DATE AND IN ORDER.

They can not come after your personal assets. They can try but they wont succeed.
So the corporate veil does protect your personal assets, it doesn`t protect your LLC that it will be sued. As for advising on Legalzoom?
I would go with the The Company Corporation, They offer you up to 50K in legal advise of your corporate veil is pierced.
Plus they are way better than legalzoom.


-------------------------

Edgar Monroy
Web Developer / Owner / Consultant
When starting your own business the need to "know-how" is greater than money!
http://www.nuevolution.net

This was googled   :-)

It was paid research on the subject, you might as well enjoy what others paid for. 

Everything you ever wanted to know about Sole Proprietorship vs LLC vs S or C corp status but were afraid to ask.

Elid, You`re a good guy. I vote for Elid as MODERATOR!  "Knowledge is knowing where to look - when you need to fing it". It`s all good!

 

I`m afraid I`m not much closer to knowing what to choose. Everything I`ve read online about "liability protection" is about debt liability. I actually don`t care about that, since that`s under my control. What worries me is someone taking legal action against me for who-knows-what reason. If an LLC does not protect me (personally) from this sort of thing, then I`d just as well be a sole proprietor with a fictitious name.

I`m inclined to create an LLC anyway, to get familiar with the process (for other future ventures), and to perhaps give more legitimacy to my business. Although, I`m surprised at the range of prices I`ve seen, which leads me to believe that some web sites that help me create an LLC may not be providing me everything I need. And yet I cannot find enough information to tell me everything I need.

For example, Pennsylvania has a "PA Open for Business" web site, run by the state, where I can create an LLC for $125. Legalzoom will charge me $139 + $265 "PA state fees" for a total of $404. I was under the impression that creating an LLC was a state-level process, so if that`s true, then is the extra $279 at LegalZoom for paying them for using their service?

-------------------------

Brian David O`Keefe
The Web Strategy Coach
briandavidokeefe.com