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Old 03-25-2011, 08:53 AM
 
Location: Nova
486 posts, read 954,406 times
Reputation: 269

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I've been working as a contractor for about 3 years. I've decided to take a more agressive stance now to build my client list and market myself.

I can do this as an independent contractor since a lot of my clients will come through people I already know or work with. But I could also open an LLC, a website and business cards to really get out there in general.

What would be negatives to opening an LLC, as a sole person, no employees? Does it matter compared to being a contractor? I mean I could still do a website and business cards (I think) without forming an LLC.

Has anyone been through this and know advantages and disadvantages?

Much thanks!
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Old 03-25-2011, 10:04 AM
 
Location: Northern MN
3,870 posts, read 5,333,640 times
Reputation: 3208
I think you have being a "contractor "confused with something else?

A contractor can do business with a DBA, LLC, CO. or an Inc
just depends how you want your business set as.

I went with a LLC.

So you were doing business as ?

Just using your name?
Did, do you pay taxes?
How were you conducting business?

If your starting a business or are getting serious about it set up a LLC. and separate your business from your personal assets.

Around here you will need a contractors LIC and your LLC.
don't for get to get some liability insurance for your business also.

good luck.
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Old 03-25-2011, 10:13 AM
 
Location: Nova
486 posts, read 954,406 times
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I worked as an idependent contractor to a company, they provided me a 1099 and I paid estimated taxes... that kind of contractor.... :-)

So, how would that differ from and LLC?
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Old 03-25-2011, 10:26 AM
 
8,631 posts, read 12,299,167 times
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A sole member LLC is a "disregarded entity" for IRS purposes. It files no tax returns. you pay your taxes as though it did not exist. But, it gives you some limited liability from claims of third parties and is therefore essential to any business activity. Anyone who conducts business activity in their own name without a limited liability company is a moron. Don't even think about it. Get on the Secretary of State's web site where you can get all the forms and pay your $125 or whatever it is where you are and move on. Open a bank account in the LLC name, put it on your business cards and invoices and you are good to go.

Seriously, this is not even a question. I could parade the horribles for you of not using an LLC, but why. Just do it.
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Old 03-25-2011, 10:38 AM
 
Location: Northern MN
3,870 posts, read 5,333,640 times
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Wilson hit the nail on the head.

A business issued a 1099 this means that you were not an employee and you were hired to perform a service.
you paid your taxes.

Like building an addition to plowing snow is something a business would contract for.

What happens if your addition collapses and hurts someone or if your plowing and you hit someone or have a slip-fall.

With out a LLC they can come after your home and everything you have. A LLC will help shelter your assets from your business assets.

In most states you can file for a LLC on line, you don't need a lawyer to answer any of the questions. Well you might if you don't know your name or address.

A tip don't use your S.S. # get a EIN#

A site that is helpful to a lot of start ups is .

Independent Contractor (Self-Employed) or Employee?

Independent Contractor (Self-Employed) or Employee?
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Old 03-25-2011, 10:51 AM
 
Location: Nova
486 posts, read 954,406 times
Reputation: 269
Excellent! The kind of work I do would rarely cause a lawsuit of sorts. But considering how litigious our society has become over the years, I suppose you can never be too secure.

I will look at those sites and set up an LLC then. Thanks! :-)
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Old 03-25-2011, 11:22 AM
 
Location: Northern MN
3,870 posts, read 5,333,640 times
Reputation: 3208
That's all well and good but even a book keeper, carpet cleaner etc etc can be sued.
It doesn't have to be an injury you can be sued for many things or reasons.

Take a look at your exposure and talk with your INS agent.
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Old 03-25-2011, 11:26 AM
 
Location: Nova
486 posts, read 954,406 times
Reputation: 269
Yep, will do... thanks again to both of you for your perspectives. Really appreciated!

Now, on to get this set up and grow the business.
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Old 03-29-2011, 12:14 AM
 
Location: El Dorado Hills, CA
3,019 posts, read 3,886,064 times
Reputation: 2818
An LLC can reduce some exposure to liability, but not all. If you set up an LLC, one of the best ways to help maintain the "limited liability" is to always present yourself as a representative of a company. So you sign emails, contracts, documents, etc. as
Liloulou, President, My Little Business

This helps prevent the argument that the customer thought they were doing business with you, not just the LLC. (Got this advice from a lawyer that work on these types of issues.)

Also, some states have a minimum "franchise tax" even for LLCs. CA is $800 per year, on top of whatever else you might pay. Make sure it's worth it where you are. $800 per year can buy a nice insurance policy for most businesses.

As an LLC, you can elect to pay your taxes as a Sole Proprietor, just like you do now with your 1099, or you can elect to pay taxes as a corporation. When you would choose which option is a discussion for a CPA that's really qualified on the tax nuances of small businesses. And most CPAs I've met are NOT qualified to do this.

A great book to read when considering LLC or Inc is "Lower Your Taxes Big Time", which is written by a former IRS lawyer. It helps define all these options and how they work...but still get advice from a great CPA>
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Old 03-29-2011, 12:23 AM
 
20,940 posts, read 16,389,436 times
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Quote:
Originally Posted by NinaN View Post

As an LLC, you can elect to pay your taxes as a Sole Proprietor, just like you do now with your 1099, or you can elect to pay taxes as a corporation. When you would choose which option is a discussion for a CPA that's really qualified on the tax nuances of small businesses. And most CPAs I've met are NOT qualified to do this.
Just to add onto this a little. It's best to elect LLC in a state that allows you to elect parternship status (this assumes you have a significan other, family member, or someone trustworthy you can share 1% of the company with). This way, you can take salary, and profits. No double-taxation of corporations and great tax benefits.

This should give you a shelter of about $212K before you start paying any significant taxes.

** I am not a CPA, or a Lawyer. I am just a business owner and this is not advice. **
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