U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Economics > Business
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
 
 
Old 11-19-2018, 03:06 PM
 
724 posts, read 503,271 times
Reputation: 409

Advertisements

I know there won't be a clear cut answer to this and generating profit isn't exactly a reason to form an LLC. However, going through the trouble of forming an LLC is a hassle and isn't free either. But it really can save you butt and is worth knowing about.

For instance, I have several hobbies that I wouldn't even qualify as any kind of business currently. Some do generate very, very small profits though. Like selling on eBay. One month I generated a grand total of about $30 in sales. It would be pretty ridiculous to make an LLC for something like that.

But what if one of these little hobbies really took off? Like instead of selling $30 worth of stuff, I sold $3,000? $30,000? $300,000? You see where I am going with this. All fairly unlikely for me to do just selling small things in my spare time on eBay, but hey it never hurts to know.
Quick reply to this message

 
Old 11-19-2018, 03:30 PM
 
65,733 posts, read 67,083,366 times
Reputation: 44043
t really has to do more with the risks involved then the profits made
Quick reply to this message
 
Old 11-19-2018, 06:49 PM
 
512 posts, read 217,803 times
Reputation: 791
How much risk due you personally want to assume? Is more the question.
Quick reply to this message
 
Old 11-20-2018, 08:04 AM
 
Location: East of Seattle since 1992, originally from SF Bay Area
28,612 posts, read 51,284,603 times
Reputation: 29182
I had a business for 16 years, revenue averaging $250-300,000/year, and never incorporated. As a sole proprietor I was on the hook personally for any incurred debt or lawsuits, but for my type of business that was not a problem. In my case there was the building lease, and a couple of accounts for materials/supplies, no other debt, and our products were not anything that would injure or kill someone if defective.
Quick reply to this message
 
Old 11-20-2018, 03:17 PM
 
Location: North Idaho
21,199 posts, read 26,236,984 times
Reputation: 39927
It's more for protecting your assets, not the income. If you own a $300,000 house and you are mailing out your hobby items from your house and someone's kid chokes to death on your item, they are going to sue and get your house, not the $30 you sold the item for.
Quick reply to this message
 
Old 11-21-2018, 07:11 PM
 
Location: Kansas/China
4,640 posts, read 2,379,132 times
Reputation: 3276
I think the question you are really wanting to ask is when should you switch to a S-Corp. A LLC is not necessary for all businesses and has the main purpose for protecting one from liability and risk. If you are selling small amounts of stuff online, there is no need for a LLC. If you have rental properties, then a LLC might be a good idea.

S-Corps can protect profits from being taxed and one will only pay income taxes on your salary. I've heard different opinions, but most don't recommend a S-Corp until you are making a minimum of $40K a year in profits. There are other instances when a S-corp can make sense, even if one makes less the $40K a year in profit, but I'd say that is mostly when dealing with high liability and partners. S-corps offer the same liability protection as a LLC.
Quick reply to this message
 
Old 11-25-2018, 10:22 AM
 
5,304 posts, read 2,445,308 times
Reputation: 5174
Quote:
Originally Posted by Mattks View Post
I think the question you are really wanting to ask is when should you switch to a S-Corp. A LLC is not necessary for all businesses and has the main purpose for protecting one from liability and risk. If you are selling small amounts of stuff online, there is no need for a LLC. If you have rental properties, then a LLC might be a good idea.

S-Corps can protect profits from being taxed and one will only pay income taxes on your salary. I've heard different opinions, but most don't recommend a S-Corp until you are making a minimum of $40K a year in profits. There are other instances when a S-corp can make sense, even if one makes less the $40K a year in profit, but I'd say that is mostly when dealing with high liability and partners. S-corps offer the same liability protection as a LLC.
The highlighted sentence above is not correct.
Quick reply to this message
 
Old 11-25-2018, 11:24 AM
 
724 posts, read 503,271 times
Reputation: 409
Quote:
Originally Posted by Mattks View Post
I think the question you are really wanting to ask is when should you switch to a S-Corp. A LLC is not necessary for all businesses and has the main purpose for protecting one from liability and risk. If you are selling small amounts of stuff online, there is no need for a LLC. If you have rental properties, then a LLC might be a good idea.

S-Corps can protect profits from being taxed and one will only pay income taxes on your salary. I've heard different opinions, but most don't recommend a S-Corp until you are making a minimum of $40K a year in profits. There are other instances when a S-corp can make sense, even if one makes less the $40K a year in profit, but I'd say that is mostly when dealing with high liability and partners. S-corps offer the same liability protection as a LLC.
I will have to look more into that as that could become a possibility. By profit do you mean net profit or gross profit?
Quick reply to this message
 
Old 11-26-2018, 12:18 PM
 
Location: MD's Eastern Shore
2,272 posts, read 2,770,562 times
Reputation: 3980
I had a boat detailing business which was an LLC. Now it is not, for the short term but plan to change that before next season. I also have a charter boat business and that I registered as an LLC right away. I don't know why I didn't put my new detailing business as one.


I can be corrected if I'm wrong but in my businesses there are chances of people getting hurt.

Charter boat equals toothy fish, hooks, wet and slippery docks and decks and water, among other hazards.

Boat detailing has electric cords and hoses laying across boat yards where people walk. Wax can be slippery on a boat. Adjusting lines to access boat in water and forgetting to readjust when done can sink a boat. And many other hazards as well.

So, for me, it is nothing about income but all about risks that can bring on hefty lawsuits. So of course insurance is needed as well, anything to protect me from financial ruin if there is a problem!
Quick reply to this message
 
Old 11-26-2018, 04:36 PM
 
Location: Kansas/China
4,640 posts, read 2,379,132 times
Reputation: 3276
Quote:
Originally Posted by TaxPhd View Post
The highlighted sentence above is not correct.
They are taxed differently then income tax, at a lower rate then income tax. Corporate tax rates are much lower then income tax rates.

Rather then just saying incorrect, feel free to add any corrections necessary.
Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


 

Quick Reply
Message:
Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Economics > Business
Follow City-Data.com founder on our Forum or

All times are GMT -6.

2005-2018, Advameg, Inc.

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top