We are planning on starting a small business in the next 6 to 9 months in part to see if we can make a few shekels on the side and in part to teach the kids (11 and 9) how all of this works. The preliminary plan is to start out selling handmade soaps, lip balm and possibly lotions at farmer's markets and the like and probably add honey, jams and related products over time. DW has been a sole proprietor for years in an unrelated business, so we are comfy with the basics of obtaining a business license, collecting sales tax, etc. What I am little unsure about is how we should organize the business (sole proprietorship vs. LLC). My key considerations are tax exposure and liability protection.
- We plan to buy liability insurance (readily available and inexpensive for both soaps/personal care items and "cottage foods." Is there any additional liability protection that forming an LLC would provide?
- I intend to have the kids involved in the business and would like to make sure they get some of the rewards. Is there any reason to pay them on the books or make them partial owners of an LLC? I don't want all my beekeeping activities to be wrapped up in the business (depreciate hives, etc.). Can I sell honey to the business at $X per pound and have the business resell it at $X+Y per pound without tax headaches?
Anything else I am missing?
