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    6 Replies Latest reply on Nov 19, 2008 2:47 PM by hassimo

    advice

    hassimo Newbie
      i am currently operating as a sole Proprietorship and been in the car detailing business for 6 years. i would like to change my status from Sole Proprietor to LLC, C. Corpoartion, or S. Corporation. which would be best for me. note that i am trying to build my business credit and that my personal credit is not that good. it could definetly be better.
      thanks
      Hassim Diallo
        • Re: advice
          Navigator
          If you're a small business (and you are, it sounds like, since you're a one person auto detail shop), then go with an LLC.
          The advantages of having a Delaware or Nevada C corp are not what they once were.
          And the filing requirements and fees won't be something you want to deal with later, unless you plan to expand.
          If your ownership is all US-based and you don't intend to grow beyond 50 shareholders, do the LLC.
          You can write off a good portion of the losses the first year with an S-- but otherwise, there is little tax difference.
          You will pay taxes no matter what, so just be proud that you're an American.
            • Re: advice
              hassimo Newbie

              thanks. this is what i was hoping for. is it possible to establish business credit for LLC.
                • Re: advice
                  intechspecial Ranger
                  I would have to agree that LLC seems to be the best fit for what you are doing.

                  LLC stands for limited liability corporation and does allow you the least risk in business loss.

                  You will assume limited liability if you are found at fault, and seems to be the best choice for small business start ups, as well as the most reccomended form of ownership if consulting with a small business attorney.

                  I hope this helps.
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              • Re: advice
                Lighthouse24 Ranger

                What is your vision of the future for the business? Do you have firm plans to expand, hire employees, open additional shops, seek investors, or franchise the operation - or is your plan to continue in the near future as a one-man show?

                If you're growing and expanding, a C-corp has a lot of advantages. If this business will be continue to be just you, however, I'm not sure that changing your legal structure will accomplish what you want. In about 999 out of 1,000 instances, a single-member LLC will never be able to build more credit than the individual owner has personally. Creditors just don't work that way -- if you (the owner) ARE the whole business, they will essentially view you and your business as one in the same, regardless of whether the business is a sole proprietorship or single-member LLC.

                Were there other reasons you wanted to change entities?
                1 of 1 people found this helpful
                • Re: advice
                  Lighthouse24 Ranger

                  For what it's worth, from books and articles by small business attorneys Richard Keyt and Jay Adkisson:

                  Single member LLCs are very popular with internet entrepreneurs and webmasters who mainly seem to form them because it's cool. But single member LLCs are not very cool for asset protection planning. To the contrary, single-member LLCs are a very dangerous tool . . . because there are too many unknowns, and the cases involving them are consistently falling in favor of creditors.

                  It is easy for an attorney to successfully claim that the LLC is an alter ego of its owner. The courts recognize the absurdity of (the single member LLC structure).

                  Potentially more serious for the LLC member is that creditors rarely sue bottom up to get a judgment against the LLC. (A creditor) first sues and gets a judgment against the member because of the member's acts or omissions.

                  Not the ONLY perspective, but a credible one. Visiting an attorney is the only way to determine for sure what's right for your situation.
                  1 of 1 people found this helpful