how to set up a small business?

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megawatt87

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Guys,

I plan to start my own electrical business. Does anyone know the type of business that will give me the best tax rate. Should I go with sole proprietorship, "S" corporation or LLC. I have a full time job already and just plan to do work on the side. I'm guessing I will not make more than $25,000 a year with the business. LLC seems like the best for protecting myself. Any advice would be great.

Thanks
 
Dennis Alwon

Dennis Alwon

Moderator
Staff member
Location
Chapel Hill, NC
Occupation
Retired Electrical Contractor
I guess everybody has their own style and needs. I chose sole proprietor when I started but quickly went over to a "S Corp" . It has worked for me as I remained a very small company -- varied from just me to me and a helper. Now that I can't work I have 2 workers and it is getting hard to keep them working.

BTW, I hope you make more than 25,000/yr. I did that my first year almost 30 years ago.
 
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CopperTone

Senior Member
Location
MetroWest, MA
Was a sole proprietor then when to an S Corp. You really need to ask your accountant - only they can really acurately tell you the differences between any business structure. All have advantages and disadvantages. I could list them as I understand the differences as they pertain to my business but you should hear it out of an accountants mouth directly.

A lot more paperwork with an S Corp, but more legitimate in the eyes of other people.
 
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Article 90.1

Senior Member
The legal protections and tax advantages of company structure also vary from state to state. For example, in Tennessee, single owner LLC's are are taxed as sole proprietorships, meaning that you are taxed on revenue and not just profits. There is an election to be taxed as an S corp, but once you switch to it, you must remain in that set up for three years.

Being taxed on revenue is a disadvantage: If you invoice a job for $100 and your expenses were $50, you still pay taxes on the revenue $100. You pay ahead, and then sort it out at years end.

Ask your lawyer and accountant what the best scenario is for your situation.
 
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Sparky555

Senior Member
If you want the best tax advantage meet with an accountant.
If you want the best legal advantage meet with a lawyer.
 
R

rodneee

Senior Member
start up

start up

PLAN A take a step back. you got a good thing going. you have a full time job and the smarts to pull in another $25,000 on the side. all you need is some form of contractors insurance, the proper licenses, permits etc. if you are honest all you do is add your gross receipts less expenses to your personal income tax statement under "other income". PRESTO!!!! you are legally operating in your own business. OR GO TO PLAN "B". MEET WITH LAWYERS (PAY MONEY), MEET WITH ACCOUNTANTS (PAY MONEY), MEET WITH FINANCIAL ADVISORS (PAY MONEY). of course the lawyers/accountants/advisors won't tell you this as you would be an easy mark for them. and of course my theory is one that can easily be rebutted using fear tactics: tax issues, legal woes etc. etc. overall KEEP IT SIMPLE FOR NOW. while there is no formal rule, i would say when your gross sales start to head north of 150,000 per year you might want to consider PLAN B. good luck
 
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