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    17 Replies Latest reply on Nov 24, 2008 4:36 PM by ChrisEaton

    SOLE Proprietor trying to make the change to LLC

    Jayzoe Newbie
      I am a single owner of a sub contractor company (not employees) and in order for me to keep my contract, the BIG company is requiring me to register as an LLC, S-Corp or C-Corp. This is all new to me and I don't even know the difference between the 3. I been having my company for about 2 years now and this is the first time they ask for this.
      Can anyone, please, advice me on this matter? I apologies for my lack of education...
        • Re: SOLE Proprietor trying to make the change to LLC
          LUCKIEST Guide
          SOLE Proprietor, Welcome

          Great to know that you have been in business for 2 years.

          This question has been asked before. Do you have an Accountant?? I would also wait until January 2009 to
          change your business (to save taxes).

          Do you know about SCORE?? SCORE is FREE both in person and on line and they should be able to help
          you, (FREE)

          Good luck, LUCKIEST
          1 of 1 people found this helpful
          • Re: SOLE Proprietor trying to make the change to LLC
            Lighthouse24 Ranger

            A single-member LLC with no employees (which is what you'd be) will essentially operate the same as a Sole Proprietorship -- which is why it rarely makes sense to form a single-member LLC with no employees. But here's a case where it does, if that's what your prime requires. An LLC will be the simplest and least time consuming for you to manage if you have been operating as a sole proprietor all along, and it will probably be less expensive to form than a corporation.

            I'm a business owner and consultant, not an attorney or accountant -- but that would be my advice. Best wishes.
            1 of 1 people found this helpful
              • Re: SOLE Proprietor trying to make the change to LLC
                Jayzoe Newbie
                Thanks, Lighthouse24. I do have my accountant and she advise me to go with S-Corp. I do not have any employees but I do have sub-contractors that are working for me... They get 1099 MISC Forms at Tax season and they make their own deductions. I also have a Business Owner Liability with a Worker's Compensation Insurance.
                I do not understand why would the Big company will ask for this now?
                Your comment is very helpful...
                  • Re: SOLE Proprietor trying to make the change to LLC
                    Lighthouse24 Ranger

                    There could be a lot of reasons, but one of the more common ones is that a sole proprietor is not an employee of his/her business -- so for contractual agreements, liability, insurance, workers comp, etc. subbing to sole proprietor creates a lot of gray areas and exceptions for the prime contractor. They want to eliminate those. It's really kind of a positive thing, if you think about it (they could have chosen to just no do business with you instead).

                    Obviously, your last post added some details (i.e., that those issues apply to you, and that you will have subcontractors), so there could be some valid reasons for incorporating. If that's what your accountant advises (who has more information about your business than anyone here does), then that's probably the way to go.

                    If you're unsure about your accountant's advice for some reason, my question to her might be this: Given that an LLC would be simpler for you to manage as a pass-thru entity (again, pretty much the same as a sole proprietorship -- meaning administration/accounting/taxes are simpler and less expensive than for a corporation), what would be the downside or risk of an LLC, and the upside or benefit of an S-Corp instead? You should be able to get an answer that leaves you with no doubts.

                     

                • Re: SOLE Proprietor trying to make the change to LLC
                  nutriwiseguy Newbie
                  I 'm not that smart on this matter but i believe you can register with the state and do not go thought other agency's that will charge you more money then is required ,do it yourself.
                  The llc stands for Limited Liability Company .Not sure on the s & c but you get better tax breaks with Incorporating .Go thought your state direct there are a lot of people out there wanting to make money on this....check out the internet for information on C & S corp its there somewhere.... Good luck have a great day ..Randy
                  1 of 1 people found this helpful
                  • Re: SOLE Proprietor trying to make the change to LLC
                    Elite1 Adventurer
                    What state are you in? Each state has its own guidelines and forms. The Arizona Corporation Commission has their forms on the internet. Doing it yourself could save you money. The process of changing your business structure is fairly simple. But, you should check with your accountant to ensure that you complete all the steps in the process.
                    • Re: SOLE Proprietor trying to make the change to LLC
                      triplert3 Adventurer
                      Hi Jayzoe,
                      Im about to incorporate myself, I just moved to ATL, Ga and today I set up my business as a sole proprietor cause is cheaper and to get things moving, like opening a bank account. But the down fall is if I get sued they could take everything that I owned opposed to a llc,c-corp or s-corp they could only go after your business assests. The cheapest I saw for the LLC set-up is 149.00 and most expensive is 449.00. You could really do it yourself. There are books in Barnes and Noble that come with a CD that can walk you through it, Good Luck
                      By the way S.C.O.R.E. means something like Senior Citizen Of Retired Entreupernuer, I forgot the exact acryonm. LOL but they very wise.
                      email me triplert3@msn.com maybe we can start settin up our LLC's together.
                        • Re: SOLE Proprietor trying to make the change to LLC
                          Jayzoe Newbie
                          Hi Triplert3

                          In 3 days, since my prime ask for this, I had been getting all the info that I could need to help me make a decision. I did NOT know the difference between one or the other and now I know the up's and down's of each (GREAT)... I also have a very good accountant and she is also calling the IRS and other agencies, just so we don't leave any open loops (Remember, this is how usually companies get caught). Thanks for your comments and whenever I get some insights, I will forward them to you.
                          By the way, thanks for the "SCORE" meaning.
                        • Re: SOLE Proprietor trying to make the change to LLC
                          Maryland_Iris Newbie

                          I just went through the same process and it was actually a lot less painful than I originally anticipated. I went to the Maryland.gov website and filled out the paperwork and sent it of to the state. I also obtained a EIN with IRS and had to open a small business account with the LLC
                          • Re: SOLE Proprietor trying to make the change to LLC
                            ChrisEaton Wayfarer
                            I'm in the same situation and I found that LegalZoom.com is a great place to go. They do just about everything for you and if you can start a LLC in the state of Nevada you're truly better off. Hope you have much success!!

                             

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