LLC or S corp?

[JohnME]

I am in the process of founding my company. I am leaning towards an LLC company, however I am curious to which you all chose and why.

Also, how exactly can I become legal? http://www.corporate.com has a package for $300-400 that does a name search and so forth, is it all I need to do?

I am trying to get all my ducks in a row and I have no one to talk to about these matters, besides you great people of course. I would like to avoid spending money on a lawyer or accountant right now as I am low on funds. I realize its money well spent, but I just need some advice to go on first I guess.

So would you guys recommend going to a website and letting it do its thing or would you do it in another way?

Do I need to file at a state level, and federal level?

Be gentle- thanks guys.

[GUNNING]

What state are you filing in?

[JohnME]

I am in Maine

[celtic]

....I have no one to talk to about these matters, .... I would like to avoid spending money on a lawyer or accountant right now...

Personally....I think you can't afford NOT to have proper advice from a professional.

Here's an article for you:
[ (http://nolo.com/article.cfm/catId/1745D9A3-D50D-4AAD-BFB3ED609A4EE3F5/objectId/9D0C8698-EC1E-4561-A1FDC7FC4BC232C8/111/ART/)Corporations vs. LLCs] (http://nolo.com/article.cfm/catId/1745D9A3-D50D-4AAD-BFB3ED609A4EE3F5/objectId/9D0C8698-EC1E-4561-A1FDC7FC4BC232C8/111/ART/)
(@nolo.com)

Here's another:http://vivisimo.com/search?tb=homepage&query=Corporations+vs.+LLCs&v%3Asources=Web (http://%5BURL=%22http://%5BURL=%22http://vivisimo.com/search?tb=homepage&query=Corporations+vs.+LLCs&v%3Asources=Web%5D%5BCorporations%20vs.%20LLCs%20w eb%20search%5D%22%22)
(This link takes you to my favorite search engine - very good engine, IMHO)



Be gentle- thanks guys. Gentle enough?

[infinity]

First you should put together a business plan. This will outline your goals and the direction that you want the company to head in. It is important to have an idea of where you're headed from the beginning.

Then what you will really need is the advice from two people. An accountant and an attorney. And they may not always agree. Do some research and then consult both of them for their opinions based on your business plan. Everything else should fall into place.

[77401]

Celtic is right!
Hire a Lawyer. It might cost you another $200 max! So you work another 2 hours on a fridayafternoon to pay for it.
Just like he(lawyer) should hire you for Electrical work, Instead of reading a Time Life book himself.
Screw the business Plan! Unless you need a bank loan or are planning on taking the company public in 3 years

[celtic]

Celtic is right!
Hire a Lawyer. It might cost you another $200 max!

Cost shouldn't be an issue as it will be a tax write-off anyway.

[infinity]

Celtic is right!
Hire a Lawyer. It might cost you another $200 max! So you work another 2 hours on a fridayafternoon to pay for it.
Just like he(lawyer) should hire you for Electrical work, Instead of reading a Time Life book himself.
Screw the business Plan! Unless you need a bank loan or are planning on taking the company public in 3 years


You missed the point. If your intention is to have a one man operation than you will need little thought about the future. But if you were planning on becoming a larger contractor with say 100 employees than you'll need to know that upfront. Sole Proprietorships, C corporations, LLC's, S corporations all have different tax structures and choosing the correct one requires an idea of what your future growth may be.

[ramsy]

I am leaning towards an LLC company, however I am curious to which you all chose and why.First, see if your state permits one person LLC's, many do not. California just allowed 1-man LLC's in 2003.

Next, see if your state permits contractor LLC's, some do not. California still does not permit doctors and some critical trades to shield themselves from operating liability, with an LLC.

In CA. the best way to check if you qualify for an LLC is if the state board approves it. Sometimes, you just have to send in the app. to find out if your state approves your LLC. You can always change your mind, cancel, or don't' follow up, and maybe lose a token app. fee.

You will also find a history on this forum under "pulling permits" that describes several ways EC's or wanabe's have done electrical service legally in their state. Some of the more frugal methods I remember include owner pulled permits. Other's lease million dollar bonds and nurse professionally prepared contracts to anticipate litigious clients.

Don't bite me for mentioning owner pulled permits, I didn't invent it, I'm just suggesting to do some searching and read the recent history of these topics youself to find out who you identify with the most.

I believe this is what Trevor meant by the business plan. Finding out where you are, and what others like you need to succeed in their legal environment.

I also agree with 77401. Traditional business plans include an exit strategy, among other things for lenders requiring assets in the event you go belly up. Lenders love property deeds, if you offer them as collateral.

[satcom]

"I would like to avoid spending money on a lawyer or accountant"


If you plan to start a business, the first requirement would be having eniough cash in reserve to give the business life, and then eniough money in reserve for a min. of 6 months salary, before you start any business, to avoid spending money, on a lawyer, or accountant could become one of your biggest mistakes, even a one man operation, requires planning, funds, and a ready market, did you check your area first, to see if it can support another contractor ? this is one of the biggest mistakes made, opening a business when the area is already saturated.

Good Luck !

[wireman3736]

I just started my own business 3 years ago, I'm a Sole Proprietor and I don't plan on hiring any employees at this time, and maybe never. I registered with the state of Vt but I did not incorporate, I had differing opinions, One misconception is that if your an LLC company that your own assets will be protected against lawsuits but anyone I have ever talked to say if your negligent on a job and theres property damage or personal Injury that a good lawyer on there side more times then not will be able to dig into your personal assets in a court of law. But again thats just opinions I have gotten from others.:rolleyes: GOOD LUCK ON YOUR VENTURE.

[JohnME]

Thanks for the thoughts everyone. I am trying to get everything in order for my 14 month goal of starting my company. I wont continue to work so my employer can become wealthy, I am going to start my company because if he can make it, so can I, if the area can support him, it can support me :)

As far as talking to an accountant or a laywer, if I do my homework why am I not capable of making the choice? I know my goals, one man shop to start with around 10 guys within 10 years. I know what you guys mean, but if I cant make my choices without hiring someone to tell me what I should do, how am I going to make business choices? I certainly dont want to pay someone.

So I guess I need to contact my state to see what they require for business.

[77401]

One misconception is that if your an LLC company that your own assets will be protected against lawsuits but anyone I have ever talked to say if your negligent on a job and theres property damage or personal Injury that a good lawyer on there side more times then not will be able to dig into your personal assets in a court of law.

It is very true, who has the better Lawyer?
I have the best Criminal defense & divorce lawyers in Houston as good loyal customers. I can't wait to get indicted or divorced and have them sitting on my side of the court room!

But The OP doesn't want to spend pocket change on a lawyer now, you know he'll never hire the best lawyer for the most money when something bad happens.

So My advice is, file a DBA @ the county clerk as a sole practicioner. Get your licenses, & Minimun Insurance. & leave it at that.
Put the company name as just your name, No Electric, or Electrician after your name. Then you can save $ on a business checking account.
Hand write out your invoices on stationary from CVS.
Get the metal press on letters from Home depot to put on your Van. If you get a dent in your van use Krylon paint & bondo & fix it your self.
Change your own oil, & dispose of it behind your garage.
Brakes going bad? You can change them your self too!
All these tips will save you money.
Get Quicken & turbo tax & you can do everything yourself.
If you want to be a professional you need to start acting like one and structure your New Company properly.

Everyone has a niche in the market and everyone has competition within this niche. I prefer to present my company better than the rest in my niche.

I am not a Master Electrician or Contractor, but I play one on TV.

[bkludecke]

I agree with 77401; go cheap at first as a sole proprieter, it's easy and simple. It worked for me very well for the first 27 years. Last year I incorporated for two reasons 1) it gave me a better tax advantage 2) I'm getting ready to start transferring some of the ownership to my son. When I inc. I used my CPA and I have a lawyer on retainer for some of the tougher calls.

By the way, anyone who thinks a corp. shields their assets from a lawsuit is dreaming. Any lawyer worth his/her salt can pierce the corp vail quite easily.

Good Luck; One more thing, sarting a business takes sacrifice, long hours and a good measure of failure and starvation; and it's worth it.

Bob on the left coast.

[satcom]

Going the Inc. route has other advantages, better insurance rates, also many of the larger companies, will not contract with one man operations, and the protection a corporation gives in most states, goes far beyond just law suits, your real protection comes with proper insurance coverage.

[j_erickson]

Personally I'd hire both an attorney and an accountant. I did and followed their advice and incorporated as an S corp instead of an LLC. I forget the specific pro's and con's. There was not a big advantage of one over the other.

If you are just starting out, you can just keep it simple and operate as a dba for a while and incorporate later. Whether it's in one year or five.

My father operated as a dba for years until I joined him and then we incorporated.

Good luck.

John

[JROD]

Personally I'd hire both an attorney and an accountant. I did and followed their advice and incorporated as an S corp instead of an LLC.


Like John, I hired an attorney and an accountant and followed their advice. I also incorporated as an S Corp.

I wish you success!

[JohnME]

Thank you guys so much. I will keep it simple and incorperate later when I can consult an attorney and an accountant. I happen to have done work for both so I guess theres my answer.

[satcom]

"I wont continue to work so my employer can become wealthy, I am going to start my company because if he can make it, so can I, if the area can support him, it can support me"

Yup, that is what most of us thought, when we were working for a contractor, then after we jumped in, most of us learned real fast, that the boss was not making all that money, and he was far from wealthy, after your in it for a few years, come back and lets us know how your doing, if you have a dime left to make the call !

I do wish you well in your venture, but the odds on a new EC business are not that good, in my county alone there were over 24 new EC started last year, this year out of the 24 five are still plugging away, just be prepared for the start up, and have some money set aside.

[JohnME]

Well, my employer started from nothing and ended up with a business valued at 13 million dollars. At my young age of 24 anything is possible with enough time, effort, and ambition, I am determined to make a decent lifestyle for my wife and I and this is the best way for me to do so, it wont happen when I keep working for the "man" ;)

[77401]

Not being a smart ass, but....Ok Maybe I am.
But who puts a value of 13 million on it? Did he sell it for $13 million?
Or did he tell you its worth 13 Million?
How do I value my business?
WHat multiplier do I put on the net profit or gross sales.
I (bizness)have never had a net profit as I keep sucking all the money out as it comes in.

[wireman3736]

Well, my employer started from nothing and ended up with a business valued at 13 million dollars. At my young age of 24 anything is possible with enough time, effort, and ambition, I am determined to make a decent lifestyle for my wife and I and this is the best way for me to do so, it wont happen when I keep working for the "man" ;)

I believe that if you put long hours in and you are dedicated to running your own business, you do quality work at a decent price there's no reason that you cant build a good business for the future, and yes you can make allot of money IMO, Then you can get more time to play, You being 24 you have a good start at a young age, I just went in to business for myself 3 years ago at 45. I should have started earlier but didn't have the guts to give up the weekly wage and bennies that I received, I miss my 4 weeks vacation and cheap health insurance but I usually have work just by word of mouth. I admit theres allot more looking, figuring and other paper work involved (especially if you don't get the job)that you have to deal with but being your own man is very rewarding when those good jobs do come your way, You get out of it what you put into it, as you get older the ol bones do start to ache in places they didn't ache before, I may have to hire me a boy in the future. :D

[JohnME]

It was for sale for 13 million dollars, word has it that it was just sold this past month.

As far as getting rich, I have my goals but I know luck has a lot to do with the whole thing as well, or so im told. We will see what happens, I just know ive gotta break loose before we have any kids. Thanks guys for your comments.

[George Stolz]

Yup, that is what most of us thought, when we were working for a contractor, then after we jumped in, most of us learned real fast, that the boss was not making all that money, and he was far from wealthy...
Yep, some of the poorest guys I know drive these...

http://www.theautochannel.com/cybercast/2000autoshows/sflias/images/mvc-200s.jpg

[satcom]

The kid up the street has a truck like that, he delivers pizza, and unloads trucks part time, at the supermarket, not what you call wealth.