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Old 10-20-2007, 04:59 PM
 
19 posts, read 99,693 times
Reputation: 12

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Hi there -

I am going to go to my CPA with this question but I would really like to hear multiple opinions first so I can more intelligently process my conversations with the CPA. Also, having known a lot of CPAs I have learned that they do not all see things the same way.

I am going to start up a retail business out of my house with sales online and possibly through boutiques and maybe department stores. I plan to start small and hope to grow big (we can only hope). My product will be a staple - like socks - so nothing elaborate. I am not making the socks - I am having them made in a factory and shipped to me. I have spoken with friends who have started their own businesses. Some have told me that, due to the simplicity of my product and the fact that I will not have any employees, I should just operate as a sole proprietorship and others have said that I should form an LLC. My concerns with the sole proprietorship are the legal ones - anything can happen right? Can someone choke on the socks and then come to sue me?? My concerns with the LLC is that it is an unnecessary exposure to too many taxes and fees. I will not be borrowing money to fund this business so I will not have any creditors.

What would you do?

Thanks!
What do you think? Sole proprietorship or LLC?

Thanks!!
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Old 10-20-2007, 05:03 PM
 
Location: in drifts of snow wherever you go
2,493 posts, read 3,571,573 times
Reputation: 692
I would go sole proprietorship and see how it goes. I would not want to spend money on extra legal feels if you can avoid it.
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Old 10-20-2007, 05:28 PM
 
Location: Cary, NC
2,408 posts, read 10,052,110 times
Reputation: 1373
I'm not a lawyer, this isn't legal advice ... yada yada.

I would be concerned about liability issues like product safety and such. Make sure you get plenty of insurance for your new business.
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Old 10-20-2007, 05:31 PM
 
1,640 posts, read 4,352,520 times
Reputation: 1012
LLC for sure. They are actually very easy and cheap to start and you will be shielded from any unforseen liabilty (you never know what might hapen).
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Old 10-20-2007, 06:23 PM
 
Location: Las Vegas
14,183 posts, read 26,767,917 times
Reputation: 27387
LLC.

If some goof ball hangs himself with one of your socks, his family will sue you. If you are a sole proprietorship, they will take your home and everything you own. Protect yourself.
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Old 10-20-2007, 06:36 PM
 
2,153 posts, read 5,144,032 times
Reputation: 650
I know you have a CPA but check out legalzoom.com

It's really easy to use pretty cheap for what you are getting.
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Old 10-20-2007, 06:41 PM
 
69,360 posts, read 58,124,596 times
Reputation: 9372
Quote:
Originally Posted by LLLegalien View Post
Hi there -

I am going to go to my CPA with this question but I would really like to hear multiple opinions first so I can more intelligently process my conversations with the CPA. Also, having known a lot of CPAs I have learned that they do not all see things the same way.

I am going to start up a retail business out of my house with sales online and possibly through boutiques and maybe department stores. I plan to start small and hope to grow big (we can only hope). My product will be a staple - like socks - so nothing elaborate. I am not making the socks - I am having them made in a factory and shipped to me. I have spoken with friends who have started their own businesses. Some have told me that, due to the simplicity of my product and the fact that I will not have any employees, I should just operate as a sole proprietorship and others have said that I should form an LLC. My concerns with the sole proprietorship are the legal ones - anything can happen right? Can someone choke on the socks and then come to sue me?? My concerns with the LLC is that it is an unnecessary exposure to too many taxes and fees. I will not be borrowing money to fund this business so I will not have any creditors.

What would you do?

Thanks!
What do you think? Sole proprietorship or LLC?

Thanks!!
Sole proprietorship.. I've been operating as one for 4 years with my home based business, you then switch to a corporation as your liability exposure expands, you hire employees, you start to "net" enough profit to make it beneficial
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Old 10-20-2007, 06:46 PM
 
Location: in drifts of snow wherever you go
2,493 posts, read 3,571,573 times
Reputation: 692
Quote:
Originally Posted by pghquest View Post
Sole proprietorship.. I've been operating as one for 4 years with my home based business, you then switch to a corporation as your liability exposure expands, you hire employees, you start to "net" enough profit to make it benefial..

That's what I would do. I'd want to get the show on the road first.
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Old 10-20-2007, 07:03 PM
 
1,640 posts, read 4,352,520 times
Reputation: 1012
LLCs are very easy to start, you could still get the show on the road very quickly.
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Old 10-20-2007, 09:06 PM
 
11,307 posts, read 46,400,988 times
Reputation: 15298
Sole proprietorship, although ... in some states, product liability laws and the court system could be a problem and you'd want the "umbrella" of a corporation.

Since several of my businesses are in the manufacturer's rep arena, I faced the same concerns you've got with your distribution company. The advice I got was to stay a sole proprietor with an umbrella business policy until I got to a bigger sales phase which required employees.

In my experience, when the focus of your business is selling products (as opposed to providing professional services) ... if you need a corporate shell after a sole proprietorship ... go for a full corporation.
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