Home Business Owners
- Thread starter PhoenixOrion
- Start date
SarcasticDwarf
Diamond Member
- Jun 8, 2001
- 9,574
- 2
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SarcasticDwarf
Diamond Member
- Jun 8, 2001
- 9,574
- 2
- 76
WTF are you talking about? There is no preference involved. You use a DBA in one situation and a LLC in another. The ONLY thing this poll measures is how many ATOT members who respond have each.
- Mar 20, 2000
- 102,402
- 8,574
- 126
what if it's an LLC d/b/a something else?
no way in hell i'd expose myself to debt on any pretty much any scale without limited liability protection. i'd check with the state to see what limited liability form has the lowest fees/taxes first.
Thats what I mean....just how many have DBA's and how many have LLC's in the community.
/Clarified.
/Clarified.
SarcasticDwarf
Diamond Member
- Jun 8, 2001
- 9,574
- 2
- 76
How is that useeful data? If you actually had a clue you might have asked "what structure did you form your company under and why?" Instead you make a completely useless thread.
Uppsala9496
Diamond Member
- Nov 2, 2001
- 5,272
- 19
- 81
I underwrite private company D&O, and I would say about 60% of the small companies I see are LLC's. DBA's account for maybe 2% if that.
On average I review about 2,000 accounts per year.
On average I review about 2,000 accounts per year.
Heh, our home business is a C-Corp. LLCs, nor S-Corps, provide the same level of liability protection.
Fern
Elite Member
- Sep 30, 2003
- 26,907
- 174
- 106
Please do explain.
I'm a CPA not a lawyer. Most of my clients set up as an S corp (best for taxes unless real estate is involved), or an LLC (lawyers here say it provides superior limited liability over that of a corporation).
Lawsuits/liability are governed under the civil code of your state's law. Perhaps something is different in CA than most everywhere else.
Here, whether your company is taxed as a C corp or S corp is completely irrelevant under civil law. It's not even allowed into evidence in trials.
--------------------------------------------------
To the OP,
There are generally only two issues involved in determining the form under which you operate your business:
1. Limited Liability. According to lawyers here, the corporate veil is easier to pierce than that of the LLC. There is no limited liability whatsoever when operating an unicorporrated (and non-LLC) business.
2. Tax planning. Briefly, an S corporation generally provides the best tax results, it offers an opportunity to save on Social Security (self employment) taxes, and avoids the double taxation problems existing under a corporation taxed as a regular (or "C") corp.
The LLC is an extremely flexible vehicle in that it can be taxed as a sole proprietor, a partnership, an S corp, or a C corp, depending upon the number of members (owners) and elections made. (The LLC also provides a much greater flexibility in crafting managerial/operating agreements upon members - a nontax issue of control etc.)
For many starting a new business without concern for the limited liability issue, operating as a unincorporated sole proprietor might be the best option (lower administrative costs and simpler tax reporting requirements). After building the business and obtaining sufficiently profitibility, switch to a S corp (under section 351 of the internal Revenue code it's non-taxable) to take advantage of SS tax savings.
Fern
I'm not entirely sure, but according to our lawyer and CPA, in CA the corporate veil is much harder to pierce for C-Corps compared to S-Corps and LLCs, which is especially important since the company is a general building/landscape contractor and lawsuits are rampant here. However, we're actually incorporated in Nevada, so I'm not sure what difference that makes.
Fern
Elite Member
- Sep 30, 2003
- 26,907
- 174
- 106
I find that extremely odd and counter-intuitive.
The "S" election is nothing more than a simple form filed with the IRS (not the CA Secretary of State etc). How federal taxation of an entity impacts CA state civil law completely eludes me. The one has nothing to do with the other.
Corporations are a creation under state law. Whether an "S" or a "C" no matter, the same provisions governing corporate rsponsibilities apply. E.g., annual shareholder meetings, resolutions, maintenence of seperate banks accounts etc.
The corporate veil is usually peirced when the "owner" treats the company as an alter ego by taking payment in his/her name instead of the companies, using the corporate bank account as his/her personal checking acct. (co-mingles funds, disbursements for non-corporate/personal bills etc). Or, corporate protocols have not been observed (e.g, no annual shareholder meetings, no record/minuites of BoD meetings, no resolutions etc.)
I would suggest you double/check confirm that there is a difference in "S" & "C" corporations.
If I get time I'll research some CA court cases.
Fern
Heh. Or they were deceptive, but I can't imagine why that would be. Actually, I recall the CPA joking that the "S" in S-Corp stands for "Shoot me please."
Anyway, I really appreciate this guys. It's actually a family business primarily run by my parents (although I own a small percentage of the company), and I've presented them with this information.
in lots of cases being an LLC is highly beneficial...a lot of liability is taken off your personal assets
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