Author Topic: New business in the trades  (Read 643 times)

joenorm

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New business in the trades
« on: September 02, 2021, 06:56:15 AM »
I'd like to start a small business in the trades. Just me in the beginning but the nature of the work will require at least one employee once I am getting consistent jobs.

The first step is to get all the paperwork done and I am stuck on what type of business to form. I think the most simple is a sole proprietor but I hear a lot of talk of LLC's being a good way to go. There will be a lot of liability with this line of work so LLC seems natural.

But I also know there are other option. S-corp, C-Corp, etc. I can read all about the pros and cons of these on the internet but it does not clear up which I should use for my business.

If I do go the LLC route do I form that first, and then file with the state? Or the other way around. If there wasn't this forum to ask these questions where else should I look as a resource? I have never run a business so I know very little about any of it.

thanks

swashbucklinstache

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Re: New business in the trades
« Reply #1 on: September 02, 2021, 07:15:36 AM »
You might check with your local small business association as at least one stop on your information gathering journey.

SeattleCPA

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Re: New business in the trades
« Reply #2 on: September 02, 2021, 10:55:04 AM »
I'd like to start a small business in the trades. Just me in the beginning but the nature of the work will require at least one employee once I am getting consistent jobs.

The first step is to get all the paperwork done and I am stuck on what type of business to form. I think the most simple is a sole proprietor but I hear a lot of talk of LLC's being a good way to go. There will be a lot of liability with this line of work so LLC seems natural.

But I also know there are other option. S-corp, C-Corp, etc. I can read all about the pros and cons of these on the internet but it does not clear up which I should use for my business.

If I do go the LLC route do I form that first, and then file with the state? Or the other way around. If there wasn't this forum to ask these questions where else should I look as a resource? I have never run a business so I know very little about any of it.

thanks

I bet an LLC works. Note that your LLC would initially (assuming you're the only owner) be treated as a Schedule C sole proprietorship for tax accounting purposes.

Later on, if it makes sense? You can file paperwork that for tax accounting purposes that lets you treat the lLC as an S corporation.

I.e., startup years? Your LLC is a sole proprietorship for taxes...

Then once you're ramped up? Your LLC is an S corporation.

BTW, I think we give away free LLC formation kits at our blog still. You might try to DIY the LLC formation first?

https://evergreensmallbusiness.com/all-states-real-estate-investor-llc-formation-kit/


Longwaytogo

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Re: New business in the trades
« Reply #3 on: September 02, 2021, 03:44:18 PM »
I'd like to start a small business in the trades. Just me in the beginning but the nature of the work will require at least one employee once I am getting consistent jobs.

The first step is to get all the paperwork done and I am stuck on what type of business to form. I think the most simple is a sole proprietor but I hear a lot of talk of LLC's being a good way to go. There will be a lot of liability with this line of work so LLC seems natural.

But I also know there are other option. S-corp, C-Corp, etc. I can read all about the pros and cons of these on the internet but it does not clear up which I should use for my business.

If I do go the LLC route do I form that first, and then file with the state? Or the other way around. If there wasn't this forum to ask these questions where else should I look as a resource? I have never run a business so I know very little about any of it.

thanks

I bet an LLC works. Note that your LLC would initially (assuming you're the only owner) be treated as a Schedule C sole proprietorship for tax accounting purposes.

Later on, if it makes sense? You can file paperwork that for tax accounting purposes that lets you treat the lLC as an S corporation.

I.e., startup years? Your LLC is a sole proprietorship for taxes...

Then once you're ramped up? Your LLC is an S corporation.

BTW, I think we give away free LLC formation kits at our blog still. You might try to DIY the LLC formation first?

https://evergreensmallbusiness.com/all-states-real-estate-investor-llc-formation-kit/

Any rule of thumb for when to go S corp?

I had a 2 member S-corp from 2005-2009 and the Self Employment and Workers Comps savings of having a smaller salary and larger profit were HUGE.

But now I'm starting up another new business and my hearing maybe my salary then was a bit aggressive meeting the "reasonable salary" or whatever the official term is.

Then I was collecting a $24K carpenter salary and then making $30-50K a year of salary/owners draws. Between FICA and WC that was saving me a good $8-12K a year so seemed worthwhile?

But now my account is saying like $60K is a more reasonable salary for owner/foreman/carpenter combo so if I only makes say $80K total is it worth the S corp paperwork and all to save Fica and Workers comp on $20K.

Not as sure :/


joenorm

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Re: New business in the trades
« Reply #4 on: September 03, 2021, 11:25:27 AM »
I'd like to start a small business in the trades. Just me in the beginning but the nature of the work will require at least one employee once I am getting consistent jobs.

The first step is to get all the paperwork done and I am stuck on what type of business to form. I think the most simple is a sole proprietor but I hear a lot of talk of LLC's being a good way to go. There will be a lot of liability with this line of work so LLC seems natural.

But I also know there are other option. S-corp, C-Corp, etc. I can read all about the pros and cons of these on the internet but it does not clear up which I should use for my business.

If I do go the LLC route do I form that first, and then file with the state? Or the other way around. If there wasn't this forum to ask these questions where else should I look as a resource? I have never run a business so I know very little about any of it.

thanks

I bet an LLC works. Note that your LLC would initially (assuming you're the only owner) be treated as a Schedule C sole proprietorship for tax accounting purposes.

Later on, if it makes sense? You can file paperwork that for tax accounting purposes that lets you treat the lLC as an S corporation.

I.e., startup years? Your LLC is a sole proprietorship for taxes...

Then once you're ramped up? Your LLC is an S corporation.

BTW, I think we give away free LLC formation kits at our blog still. You might try to DIY the LLC formation first?

https://evergreensmallbusiness.com/all-states-real-estate-investor-llc-formation-kit/

This highlights what I don't understand. Why would I not just start as an S-corp if I may end up there anyway? Would I need a certain amount of revenue before an S-corp makes sense?

Kroaler

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Re: New business in the trades
« Reply #5 on: November 05, 2021, 08:52:07 AM »
I'd like to start a small business in the trades. Just me in the beginning but the nature of the work will require at least one employee once I am getting consistent jobs.

The first step is to get all the paperwork done and I am stuck on what type of business to form. I think the most simple is a sole proprietor but I hear a lot of talk of LLC's being a good way to go. There will be a lot of liability with this line of work so LLC seems natural.

But I also know there are other option. S-corp, C-Corp, etc. I can read all about the pros and cons of these on the internet but it does not clear up which I should use for my business.

If I do go the LLC route do I form that first, and then file with the state? Or the other way around. If there wasn't this forum to ask these questions where else should I look as a resource? I have never run a business so I know very little about any of it.

thanks

I bet an LLC works. Note that your LLC would initially (assuming you're the only owner) be treated as a Schedule C sole proprietorship for tax accounting purposes.

Later on, if it makes sense? You can file paperwork that for tax accounting purposes that lets you treat the lLC as an S corporation.

I.e., startup years? Your LLC is a sole proprietorship for taxes...

Then once you're ramped up? Your LLC is an S corporation.

BTW, I think we give away free LLC formation kits at our blog still. You might try to DIY the LLC formation first?

https://evergreensmallbusiness.com/all-states-real-estate-investor-llc-formation-kit/

Any rule of thumb for when to go S corp?

I had a 2 member S-corp from 2005-2009 and the Self Employment and Workers Comps savings of having a smaller salary and larger profit were HUGE.

But now I'm starting up another new business and my hearing maybe my salary then was a bit aggressive meeting the "reasonable salary" or whatever the official term is.

Then I was collecting a $24K carpenter salary and then making $30-50K a year of salary/owners draws. Between FICA and WC that was saving me a good $8-12K a year so seemed worthwhile?

But now my account is saying like $60K is a more reasonable salary for owner/foreman/carpenter combo so if I only makes say $80K total is it worth the S corp paperwork and all to save Fica and Workers comp on $20K.

Not as sure :/

I wondered this. In the end I went sole proprietor.  Not because I did the math.... But because it was easier and allowed me a faster and simpler start.  I think starting an imperfect business is more valuable than planning the perfect one.   I do understand there is certainly a point down the road where S-corp is a smarter move.  I think its above the 100k, so my goal was to grow there first before even considering it.    Probably not the smartest move but I would have had analysis paralysis if I tried to do everything in the absolute most optimal way.

trollwithamustache

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Re: New business in the trades
« Reply #6 on: November 05, 2021, 08:56:05 AM »
Do you have an accountant? You should, and follow their system. Its not just the LLC or S-corp. Its the accounting system, how to track costs and deductions and keep records.
 States can have different rules on Corp  vs LLC to that probably more affect professionals than you, but those rules are out there.