Business structure, LLC, Partnership, Sole proprietor ?

[Matt Michael]

I've been a "one guy with occasional help" kind of tree biz for 21 years but it's time to upscale a little. I know next to nothing about business. I climb and will be the only one climbing. No bucket truck.

A good friend is investing in a chip truck and chipper for me and we're considering what business models make the most sense from a tax, liability, and workmans comp point of view. Hoping for some guidance from those who are already doing it.

I believe that as an owner/operator, I don't have to have workmans comp on myself but of course, anyone I employ must have it. We are considering a partnership so that we can both work without having to have comp.

Also wondering if it makes more sense to make ourselves employees with comp and a wage or salary, or if we should just pay ourselves whatever profit is left over?

Whatever the case, we do want to be able to employ at least 1 person with coverage, and overall not be stupid about taxes. Also would like everything to be as simple as possible.

Thanks in advance!

 

[Bill Becker]

Matt,
Do not go in to a partnership with anyone. You are responsible for any thing he/she does, good or bad. There can only be one boss, if your partner isn't pulling his weight you will have to pull his load. You can't fire him, he has to buy you out or you have to buy him out. I've seen many friendships ruined by partnerships.

Many guys who are good at what they do fail in business. You don't run a small business, it runs you. You asked questions about taxes, type of business and workmans comp insurance. Pay someone who specializes in setting up a business for clients in your state (each state is different), you will be much better off. I recommend this person be a CPA or have one on staff. I own a small tree service with three employees, I signed a form exempting myself from workmans comp. I paid someone to set up an S Chapter Corporation for me. I do all my accounting and tax forms and employee reports however I pay a CPA to do my personal and corporate income tax returns.

Some hard lessons I learned:

Friends are friends, family is family but business is business.

In business the tax collector comes first.

The customer is not always right.

All decisions for your business should be based on what's best for your business, not what's best for anyone including yourself.

Hope this helps.

 

[CUCV]

I have been considering the same for myself. I have been sol prop for many years but am considering LLC now. Since I have no employees it is primarily to protect my assets. Being insured for tree work make it so expensive to insure all my equipment even my landscaping equipment. If I split into two LLC's it will be cost effective to insure most of my equipment under the landscaping side of things and there is no reason to pay tree work insurance rates and W/C for landscaping work. I have talked to my CPA and insurance company a bit about W/C and employees for the future. It sounds like it may be possible to exempt up to three "members" of the LLC from W/C which would be cool and just do disability.

 

[Matt Michael]

Invaluable perspectives folks. Keep it coming!

MM

 

[dave066]

If you have a good woman at home, go for woman owned. Get certified under swam, get a duns number, and the government contracts are all over the place, not to mention the tax benefits to swam certified company. there are a couple gov. websites to place bids.:chainsawguy:

 

[coolbrze]

Like previously mentioned, DO NOT partner up w/ someone. Too many issues down the road, been there, done that, will NEVER do it again. Also like stated above, contact a CPA as every state is different. In VA you are required to have workers comp if you have more than 3 full-time employees. That's how a lot of companies get around it in VA, they keep a bunch of guys on payroll, but they're not full-time. With that being said, you're asking for trouble in our industry if you're not 100% covered. It's just too dangerous and makes no sense trying to cut costs in this area. Pinch pennies elsewhere b/c if one of your guys gets hurt & he sues you or the H/O - you're done! In terms of paying yourself whatever profit is left over, you really should pay either wages or salary (whichever you choose), then either reinvest the profits back into the company (if you're trying to grow).

 

[newb]

Have your buddy with the equipment start a "front" company. Then your company can do a lease from him. If you need more equipment his company buys it. I know some guys started a Tool & Die shop this way. Then if business ever got really bad they could only take the machines back and not go after the shop.