Type of Company

January 05, 2004 | View Comments (6) | Category: Web Business

Summary: What type of company should 9rules become? LLC? Inc? Stay sole proprietorship?

It is time to make 9rules an official company so to speak (greater than sole proprietorship as it is registered now). I am thinking about going to either an LLC or Corporation. Being that I am in Florida I can't say that I am too knowledgable about all of this kind of stuff. I have been recommended to make the company an S Corp for tax reasons and this is something I have to investigate further. For those of you out there who formed your own ventures, how did you decide? In general what is best for any type of consulting agency?

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Comments

#1

When my partners and I formed our design agency we incorporated in Delaware (because of the tax situations there) but we ran into trouble later on when we tried to dissolve the company. Not that you would have to do that Scrivs:)

I have from more than a few people that LLC is the way to go.

I can't elaborate because that is the extent of my knowledge in the business realm.

Good luck!

Todd (http://www.monkeyhouselounge.com/tcoleman2/)

#2

It's not really a matter of what's "best" or "typical" for a consulting company. But rather who / where you are (financially speaking) and what your vision for the future is.

Every setup you can go with has its advantages and disadvantages. Since you admit that you're not too knowledgable it's obviously smart to discuss the matter with an accountant before diving into the gene pool of corporate life and responsibilities.

Mark Fusco (http://www.lightpierce.com/ltshdw)

#3

Definitely a matter for your lawyer or accountant, but personally, I'd go for an LLC over an S-corp (unless you expect to need to sell stock). We (beyond) tried a C-corp first, but there's just too many tax traps and obscure regulations. An LLC has all the taxation benefits of a partnership/sole-proprietorship combined with the limited liability of a C- or S-corp. On top of that, an LLC is far more flexible than a C- or S-corp. But again, discuss it with an accountant or lawyer. Also, to get an idea of what's out there, you can also set up an meeting with your local SBDC office- they should be able to make some recommendations. If you're willing to wade through some rather dry legal stuff, hit your local bookstore and read up on possible forms of organization as well. If personal liability isn't too much of an issue, stick with sole proprietorship- it's a lot less paperwork ;)

J.D. (http://beyondcomputing.biz)

#4

I'd go with LLC. That's what I did. Not too much paperwork -- one legal form, a $40 fee which you can write off at tax time. Just make sure you have a decent accounting office, the first year especially... they can help a lot with tax breaks and stuff... dedicated home office = writeoff on rent/mortgage utilities and more...

I wouldn't screw with a legal corporation until you have some employees and need whatever additional protections it offers. Becoming a corporation can be expensive to do right, because the paperwork is more complex and some parts of it can never change, so you have to hire a lawyer.

That said, some states are different than others. IIRC New Hampshire is the best state for corporations, while Indiana is considered (among) the best for the LLC. The LLC laws in your state might be more restrictive or something.

An LLC will give you the majority of the benefits of a corp with few of the hassles. The only real detriment (at least, at your level) is that you cannot reinvest profits in the business without paying taxes on them, anything above operating expenses is considered income.

As for SP... talk to your tax advisor and you'll probably find that it offers fewer benefits to you.

And from a business aspect, would you feel more comfortable doing business with a Bob Bobson's legally registered company Bobson, LLC; or just Bob Bobson, a sole proprieter? There's really no difference in the skill level, but there's a difference in the customer's perception. You look more professional if you go to the trouble of procuring legal status. It also lets you register for a DUNS number, which makes you a 'real' business to much of the world... and offers such exciting opportunities to receive b2b telemarketing calls (I can't complain that much, I get maybe 2 or 3 a year)

JC (http://www.thelionsweb.com/weblog)

#5

oh, and there's absolutely loads of wonderfully useful information at http://www.tannedfeet.com/

dumb URL, but great website.

JC (http://www.thelionsweb.com/weblog)

#6

First, seek advice from a business advisor and second, hire a good CPA. When you sign up for a c-corp, ya there are some tax issues to deal with, but there are also many benefits to it. As previously stated, it's all a matter of where you want to go and your vision. LLC could be more ideal for your situation, I donno, more details are needed. I would see out a business advisor, specifically someone you feel you can trust a great deal.

Nick (http://www.digital-web.com)

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