incorporate, or not?

[Mr. Wizard]

I am considering incorporating my shop. When some of ya'll started out, I'm sure a few of ya'll were sole proprietors. What made you incorporate? What are some of the benefits, drawbacks? My position is I am a sole proprietor, have two full time helpers, pay plenty in taxes and insurance. I know I should speak with an attorney right before I cross that bridge, but if any of ya'll could fill in some blanks I could speak a little more intelligently to my attorney and perhaps understand him a little better.

 

[LarryFine]

The basic difference, as I understand it, is that the corporation becomes a separate entity, and you become one of the employees as well as an officer (I'm president.)

We have a corporation name and a trading-as (or DBA (doing-business-as)) name. Beyond that, I know no more than you do. I agree with the get-a-lawyer advice.

 

[fisherelectric]

You would only pay self employment taxes (social security-12.4%) on your salary, rather than the entire profit of your business as you do as a sole proprietor.

 

[hardworkingstiff]

You would only pay self employment taxes (social security-12.4%) on your salary, rather than the entire profit of your business as you do as a sole proprietor.

Don't forget the medicaid tax for a total of 15.3%. If you are an S-corp., you could salary yourself low and the profits that come out of the business would not be subject to the 15.3% tax (up to the limit of course).

 

[hurk27]

Many will incorporate for liability issues, splitting a company up can protect different areas of a company, keeping certain assets protected, incase of lawsuits, and done around here just for that. in some areas though this is not true, so the best advice will be a lawyer, advice for your area.

 

[mkgrady]

As a sole proprieter, if you are named in a lawsuit you are on the hook for damages if you loose. Your insurance will cover up to the limit of your policy and you pay the rest if a judgement is higher than your coverage. In a corporation you have a shield against liability. Your corporation gets sued but you avoid personal liability. I'm told there are lots of exceptions to hiding behind the corporate shield but you have no shield at all right now. Right now you could loose all your personal assets.

 

[infinity]

IMO a corporation is a better choice given the fact that this trade is wide open to liability. How many times has someone labeled something an "electrical fire" when they seemingly can find no other cause. If you happened to be the last company working in that builinding it's possible that you'll be held liable even if your company had zero culpability. Corporations come in different types. Choosing one is based on a number of factors, liability and tax issues being just two of them. I would get opinions from both a lawyer and an accountant or a tax attorney.

 

[Cavie]

When I opened my business, I incorperated because my house was paid for. Lawyer told me the corp would be a shield in case of any problems.

 

[hurk27]

Many will break up a company in several corporations, have the vehicles in one, materials in another, property in another, Etc... and do in house leases between each sections, this way if one gets hit by a law suit, it don't affect the other parts, also another means of tax write off.

 

[RH1]

99% of contractors who incorporate for liability reasons actually fail to do so. If you don't follow the law exactly, and have regular, documented corporate meetings and conduct yourself like a real corporation, it is laughably easy for an attorney to "pierce the corporate veil"

http://en.wikipedia.org/wiki/Piercing_the_corporate_veil

 

[jaylectricity]

I am considering incorporating my shop. When some of ya'll started out, I'm sure a few of ya'll were sole proprietors. What made you incorporate? What are some of the benefits, drawbacks? My position is I am a sole proprietor, have two full time helpers, pay plenty in taxes and insurance. I know I should speak with an attorney right before I cross that bridge, but if any of ya'll could fill in some blanks I could speak a little more intelligently to my attorney and perhaps understand him a little better.

I know this doesn't actually answer your question, but are we to assume that one of your helpers is just a gopher/cleanup guy? Around here each licensed electrician is only allowed to supervise one helper doing electrical work.

 

[Phossilman]

I know this doesn't actually answer your question, but are we to assume that one of your helpers is just a gopher/cleanup guy? Around here each licensed electrician is only allowed to supervise one helper doing electrical work.

Very few if any states, certainly none that I know of, have the licensed journeyman to helper/apprentice ratio Massachusetts has.

 

[Mr. Wizard]

I know this doesn't actually answer your question, but are we to assume that one of your helpers is just a gopher/cleanup guy? Around here each licensed electrician is only allowed to supervise one helper doing electrical work.

It's not like that down here. When I worked for another EC, the owner would sometimes put four or five apprentices with me. Some had experience, and others didn't, but I sure wished at times there were another journeyman on the job to babysit some of them.