Did you set up a corporation?
- Thread starter Ben Musha
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Griff93
ArboristSite Operative
Yes I did. You'll need to see an attorney to do this properly as they must be filed with your state and contain certain things. Most form a Limited Liability Corporation. The requirements vary state for state. Some will allow a single member LLC, some may not. The corporation is a seperate entity from you personally. It has it's own tax ID number and finances. The important thing is it gives you protection in case something was to ever happen at work someone usually can't take your house or personal assets. S corp and C corp are the other two I'm aware of. You're taxed differently depending on which one you are.
LLC is by far the simplest to set up and do the tax accounting.
LLC is a state designation only..IRS does not recognize LLC. You will be a sole proprietor/partnership/S-Corp, etc... under IRS code. But you still should get an EIN from IRS before you get the first check. Open up an account at the bank with that EIN and ONLY deposit checks made out to the business there, and ONLY make payments/withdrawals for business expenses from that account (payments to yourself as part of "salary" are OK. Buying a new TV, groceries, or toys for the kids or earrings for the wife is not OK). Buy insurance in the name of the company with the EIN...do not let them issue it in your name.
All this is to protect you from liability associated with your business. If you have an accident on the job and it is in your name, they can come after all of your assets (house, personal cars, wife's earrings, etc...). With an LLC, they can only take everything belonging to the business. (repeating what was just said above...) It is called a "corporate veil". The reason you do not intermix personal and business accounts is because that "pierces the corporate veil". In other words, you cause the accident; they sue; you say "but you can't sue me, just the business". The plaintiff's lawyer will find that transaction where you bought your personal items and say "but you didn't think the finances are separate, why should the court?" and the court will agree.
Far more legal "advice" than a forester/arborist should be trying to offer... talk to an attorney and an accountant. If you have one of the two you like, ask for a referral for the other - you want your attorney and account to be friends with each other.
LLC is a state designation only..IRS does not recognize LLC. You will be a sole proprietor/partnership/S-Corp, etc... under IRS code. But you still should get an EIN from IRS before you get the first check. Open up an account at the bank with that EIN and ONLY deposit checks made out to the business there, and ONLY make payments/withdrawals for business expenses from that account (payments to yourself as part of "salary" are OK. Buying a new TV, groceries, or toys for the kids or earrings for the wife is not OK). Buy insurance in the name of the company with the EIN...do not let them issue it in your name.
All this is to protect you from liability associated with your business. If you have an accident on the job and it is in your name, they can come after all of your assets (house, personal cars, wife's earrings, etc...). With an LLC, they can only take everything belonging to the business. (repeating what was just said above...) It is called a "corporate veil". The reason you do not intermix personal and business accounts is because that "pierces the corporate veil". In other words, you cause the accident; they sue; you say "but you can't sue me, just the business". The plaintiff's lawyer will find that transaction where you bought your personal items and say "but you didn't think the finances are separate, why should the court?" and the court will agree.
Far more legal "advice" than a forester/arborist should be trying to offer... talk to an attorney and an accountant. If you have one of the two you like, ask for a referral for the other - you want your attorney and account to be friends with each other.
mike515
ArboristSite Operative
ChoppyChoppy
Tree Freak
ChoppyChoppy
Tree Freak
As far as forming the LLC, Legal Zoom can do it. Depends on the state for the cost. Mine was around $750 from what I remember. Some states are more, some are almost free.
Griff93
ArboristSite Operative
As for Legal Zoom, it was cheaper to pay an attorney to handle all of it when I did mine. Between getting it notarized and seeing the probate judge for filing with the state there's some leg work involved. Worth checking around a bit with some local attorneys.
Ben,
Welcome to A.S.! There is a little more you have to do than just set up a corporation, It creates certain requirements that you have to comply with. Most people will use the services of a lawyer and an accountant to advise them on the legal issues, and the reporting requirements. It is different in every state. A basic corporation is pretty simple, but needs to be done right.
Minnesota puts out a great guide for people starting a business: http://mn.gov/deed/images/GuideToSTARTINGABUSINESSINMINNESOTA2015.pdf
You can get paper copies of this from some State offices.
Also check out this website: http://mn.gov/deed/business/starting-business/
There are also periodic 'going into business' seminars from SCORE that I found very helpful: http://www.score-mn.org/
These cover starting a business, legal requirements, employment practices, insurance, state and federal reporting, etc.
I don't want to scare you off - incorporating is a good thing to do. But it is better to find out ahead of time what you need to do, than to start getting scary letters from government offices down the road.
Philbert
(in Saint Paul)
Welcome to A.S.! There is a little more you have to do than just set up a corporation, It creates certain requirements that you have to comply with. Most people will use the services of a lawyer and an accountant to advise them on the legal issues, and the reporting requirements. It is different in every state. A basic corporation is pretty simple, but needs to be done right.
Minnesota puts out a great guide for people starting a business: http://mn.gov/deed/images/GuideToSTARTINGABUSINESSINMINNESOTA2015.pdf
You can get paper copies of this from some State offices.
Also check out this website: http://mn.gov/deed/business/starting-business/
There are also periodic 'going into business' seminars from SCORE that I found very helpful: http://www.score-mn.org/
These cover starting a business, legal requirements, employment practices, insurance, state and federal reporting, etc.
I don't want to scare you off - incorporating is a good thing to do. But it is better to find out ahead of time what you need to do, than to start getting scary letters from government offices down the road.
Philbert
(in Saint Paul)
ChoppyChoppy
Tree Freak
for AK it's $100 every 2 years for renewal, but it's different for each state.
Currently fighting that right now. They cashed my check last year but when I happened to lookup the info a few weeks ago they had it listed as "dissolved".
Called them and "oh... my bad."
Frigging idiots down there in Juneau!
Mine is a sole proprietor LLC so it's easy to file taxes and what not.
Erik Hakso
ArboristSite Lurker
A corporation is a legal entity. You become an employee of the corporation. By having a corporation you become distanced from it. That is a person can sue the corporation but not you personally since you only work there. That is probably the biggest benefit. As a Tree Service you will probably want to set up as an S Corporation. S stands for Small and the IRS let's you roll the financials from the corporation into your personal taxes. That way you do not get taxed twice (once as a corporation and once as an investor).
Erik
Pro Cut Tree Service Shoreline, WA
Erik
Pro Cut Tree Service Shoreline, WA
S-Corp is a WHOLE bunch more paperwork than an LLC... Best to get real legal advise on the difference between the 2 though.
Menchhofer
ArboristSite Guru
Most fees charged by Legal Zoom are astromomical. Setting up a corp or LLC anyone can do. Usually less than 100.00. Just go to your local state website and follow the directions. Easy-peasy.
BuckmasterStumpGrinding
ArboristSite Operative
That hundred dollars is just the filing fee to get your corporation set up. If you want the legal protections of a corp or an llc you need to run your business like a corp. You need board meetings and quarterly reports. If you cannot produce quarterly reports your corp will be worthless if challenged in court. I suggest checking your local SBA or community college business faculty for assistance and probably a board member to keep your reports legal.
Agree that legal advise is the best place to start. However, just to clarify: a board of directors is required for an S-Corp (or a C-Corp), however it is not required for a single member LLC. Again, that is NOT to say that you don't need an accountant and lawyer to do an LLC right...just pointing out that is one of the differences between S-Corp and LLC (and just to muddy the waters...there are plenty of LLCs owned by S-Corps...)
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