# Sole Proprietorship vs. S - Corpation



## Canyonbc (Sep 5, 2007)

Does anyone here know the difference...?? and the advantages vs. disadvantages of each???

Is a S - Corp....part of a LLC???


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## Canyonbc (Sep 5, 2007)

Never Mind...

Did a little search on google, and the IRS page...

I answered all my questions..

So thanks everyone


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## LarryTheCableGuy (Sep 5, 2007)

Glad that we could help.

.


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## Canyonbc (Sep 5, 2007)

haha..

yep yep

haha


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## TreeServiceMana (Sep 5, 2007)

Canyonbc said:


> Does anyone here know the difference...?? and the advantages vs. disadvantages of each???
> 
> Is a S - Corp....part of a LLC???



Even though you found your answer I thought I'd chime in.

Sole Proprietorship means you're running your company under your name. This effectively exposes you to all the liability of the company. Say you cut down a tree, it falls on the clients house and they sue you for $5 million. Well, assuming your insurance doesn't cover all of that you run the risk of having to pay for that out of your own pocket even if you close down your company. This is something that can haunt you for the rest of your life, force you into bankruptcy, etc. 

As a corporation the COMPANY is liable and they will sue the company and not you. You're simply an employee of the company. This effectively protects you from the liabilities of the company (Note: the protection is not absolute and is considerably weaker if you're a one man operation). There's also additional tax benefits such as being able to receive company profits which are taxed at a lower rate then your normal salary. The only real drawback to a corporation is that it costs more to operate. You have an $800 annual fee, the cost to incorporate (runs anywhere between $300 and $2000 typically depending on who you have do it), and some additional paperwork that must be filed every year with the feds like minutes-of-the-meeting. If you decide to take on a partner and give them shares of your company you should have some additional documents drafted like a "buy-sell agreement" which dictates who and how shareholders can sell their company shares to. Once you get into that you should consult a lawyer.

You'll have to speak with an accountant about the differences between an S-Corp and an LLC to see which one is best for your company. I know that one drawback to an LLC is that it's a fairly new type of corporate entity. As such some banks won't give an LLC loans or credits.

EDIT: I wanted to point out that I'm not an accountant or a lawyer. Always consult your accountant or lawyer when making these decisions. I just have a lot of experience dealing with these types of things. Thought I'd pass it along.


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## Canyonbc (Sep 5, 2007)

Tree Service Mana..

Thank you..that was some great information, and went into some more insight then i read last night. Reading the irs sight, is some boring stuff.

Thanks again

Canyon


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## SWAMPY036 (Sep 5, 2007)

A lawyer will tell you you need a corp. But my acc. told me I will be fine with a S. P. He reached that conclusion by asking if I have alot of money in bank? NO. Do you own or rent? Own Do you owe more than 3/4 of your assest vale yes. So you cant take money from someone who does not have any and the bank owns your house and they are not about to give it away when they know your making the payment. So when your answers change to the questions we will talk about some options. hope this helps


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## Canyonbc (Sep 5, 2007)

*Swampy036*

Thank you, 

Yes it does help, its hard because i am college student right now....so for the past 3 years i have ran as a sole prop. but was wondering the diff., between a s corp and sole p....maybe a prof. can stear me in the right direction or i will visit a lawyer for the final say.


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