incorporating in CA: options?

[nostatic]

I think it has come time for me to incorporate. I'm doing consulting work on the side, and will likely want to itemize and make deductions for capital expenses this year (I'll be in the 5-figures for income by the end of the year). It basically is a one person show at this point, as I will subcontract some research and other work (ie they won't be my employees). Plenty of web lawyer firms that'll do boilerplate paperwork for cheap to do the incorporation. Seems that an LLC might be the way to go, but sole proprietorship is another option.

Any pluses and minuses for people who've been there, done that?

[GDSOB]

You don't need to incorporate to deduct business expenses for your consulting. You are already a sole propriortorship, you may want to file a ficticous business name statement if you are doing business as another entity. Make sure your tax preparer knows what you are trying to accomplish.

LLC's are good for removing yourself from the liability of your business. However as a sole owner, there is no tax benefit.

An S-corp would be another choice. Usually as a single owner corporation. It eliminates double taxation on business earnings and provides some liability protection. Has many of the best features an LLC and a corporation. It also allows deduction of business expenses like medical insurance as an employee benefit if set up properly.

[Sonic dB]

S Corp allows you to 'pass through' your business expenses and losses
if any, to your personal tax return. This is the way to go, for people who
have a 'regular job' and also a side business. CA charges a yearly fee of
$800 Corp tax, + this goes up if your sales reach a certain yearly level.
Check out the book "Lower your Taxes Big Time" by Sandy Botkin which deals
with the topic of using the S Corp effectively.


http://www.amazon.com/Lower-Your-Taxes-Wealth-Building-Reduction/dp/007140807X

www.legalzoom.com did a nice job for me, setting the whole thing up and paperwork

[red-beard]

If you incorporate, expect that over the next year you will hear from atleast 5-10 gov't agencies in California, looking for a handout.

Options: Move to a different state. It's what we did for my wife's business.

[Don Plumley]

Todd - I've done them all: Sole Proprietiorship, LLC, S-Corp. Too busy at work today, but I have the LLC forms if you need which is probably what you need if you have subcontractors and want to help separate your personal assets from liability, but have the benefits of passing income and expenses through using a partnership tax structure (not corporate taxes = double taxation).

DJP

[campbellcj]

Don't forget your local taxation as well - my company (C-corp) in Santa Monica as well as my wife's (S-corp) in LA both get hit for several $thou each year. There are property taxes as well as revenue-based business taxes.

If your business is cash-flow negative from an accounting standpoint, an S-corp can be great if there is other income to offset with the loss.

[slodave]

If you really want to incorporate, look at Nevada. A lot of small companies here incorporate there, even though business is conducted here.

I run my own business or at least I am trying. I don't even have a DBA, as I use my name. I have had no problems deducting bus. expenses. I even deduct my DSL at home (I work out of my house). With a 5 figure income, don't worry about an audit.

Dave

[lookin]

I'm a general contractor and setup my business as a C corp for the medical reimbursement and 401k plans.

If I was you, I would go to the book store and purchase the below listed book from Nolo.

Form your own Limited Liability Company, by Attorney Anthony Mancusco.

The book explains the pros & cons and also includes all the forms.

Dale

[Tobra]

I am a sole prop and have employees. The added expense of incorporating without much benefit made up my mind. Went through it pretty extensively with my accountant, and even with several hundred thousand in gross income to the practice it it was not financially beneficial.

[Porsche-O-Phile]

Originally Posted by Tobra

I am a sole prop and have employees. The added expense of incorporating without much benefit made up my mind. Went through it pretty extensively with my accountant, and even with several hundred thousand in gross income to the practice it it was not financially beneficial.

Until you get sued.

[Shaun @ Tru6]

We went with an S-corp for Little Traveler with some of the points raised here in mind.

This wouldn't effect you now, but I had an LLC with a partner and a poorly written operating agreement that caused a lot of headache. I think the same situations could have arisen within a corporate structure, but I've been gunshy of LLC's ever since.

[Tobra]

Originally Posted by Porsche-O-Phile

Until you get sued.

That is why I have liability insurance. If I do more than a million dollars worth of damage to someone I deserve to lose my house

['89cab]

I retired June 30, 2007. Before I bailed, I started meeting with Small Business Development Center (most are hosted by community colleges -- at least in CA) counselors who provide free consulting. I put in ten to twenty hours of research on my own for every hour with them, but they helped guide my thinking.

Because of the ease, I started a sole proprietorship. I filed an SS-4 with IRS (online on a Sunday) to get an Employer Indentification Number, filed ficticious name form with Monterey County (I live in unicorporated area), and ordered business cards.

I was advised by one counselor to form an LLC and advised by an accountant to form an S corporation -- which is what I probably will probably do January 1.

I can personally recommend SBDC counselors.

There are also a number good sites and books available -- particulalry

http://www.nolo.com/