Help me set up a LLC

[echoromeo]

I am pondering setting up a small remote/freelance project. Do most of you create an LLC?

Thanks.

[fifthcircle]

Talk to a tax person.

That being said, what I was told is that if you are earning under 6 figures, it is probably best and definitely easiest to set up a simple DBA. This is what I've done and it works well for me. Eventually I'll have to incorporate, but I'm putting it off as long as possible.

--Ben

[NorseHorse]

Sole proprietorships are also very easy if you aren't making lots of money off of recording. Essentially, you just declare your earnings on your regular income tax form. Can't remember the specific section.

[fifthcircle]

Schedule C on your 1040 form.

--Ben

[echoromeo]

Originally Posted by NorseHorse

Sole proprietorships are also very easy if you aren't making lots of money off of recording. Essentially, you just declare your earnings on your regular income tax form. Can't remember the specific section.

Thank you for the suggestions, so most of you are schedule C?

I'm asking about the LLC because of potential liability issues. If a student trips over a mic. cable at a recital, the LLC would protect the personal assets. Maybe it's unnecessary? I understand liability insurance could also serve as a potential protection.

[Seamus TM]

Yes, it's true.
You have to cover your ass because you can't trust anyone.
We have liability insurance, but we are also creating an LLC for that reason.
Reason being, if something goes real bad, the insurance won't be enough.

Now, the only reason I'm going that far is because I'm married with a kid and own a house and two cars.
If I was back in the good old days of scraping coins together for my basement apartment rent... I wouldn't bother with any of it... except for gear insurance, of course.

You have to evaluate your own situation.

[Remoteness]

We incorporated the company in the late 70s as a S corp.

If I was putting together a new company I would be considering a limited liability corporation or partnership for the obvious reasons.

Originally Posted by echoromeo

Thank you for the suggestions, so most of you are schedule C?

I'm asking about the LLC because of potential liability issues. If a student trips over a mic. cable at a recital, the LLC would protect the personal assets. Maybe it's unnecessary? I understand liability insurance could also serve as a potential protection.

[Tommy-boy]

Originally Posted by echoromeo

Thank you for the suggestions, so most of you are schedule C?

I'm asking about the LLC because of potential liability issues. If a student trips over a mic. cable at a recital, the LLC would protect the personal assets. Maybe it's unnecessary? I understand liability insurance could also serve as a potential protection.

Some thoughts:
For liability protection, an LLC will help and will shield you more than setting up as a sole proprietorship and picking up your earnings on sched C (sole proprietorship gives you no protection, but is easy to set up). However, you might want to pause for a minute to ponder what assets you have. For many people, homes and retirement assets are where most of their money is. In most states, if you own a home jointly with another person - it will generally be unavailable to settle lawsuits of just one of the joint holders. Money in an IRA or 401K account will also be untoucheable. So what's left? Still have something to lose? Then consider an LLC. Otherwise, why bother?

Thoughts on insurance - it can sometimes be a target to stimulate a lawsuit because insurance companies typically have deep pockets. Although there is still a need for many types of insurance, I'm not sure liability insurance is more helpful than setting up an LLC.

Other thoughts on LLCs: If you set up a single member LLC, the income flows right through to your return, no separate federal return is required for the LLC (it would be considered a disregarded entity, which is a fancy tax term meaning it gets ignored for federal purposes). However, seeing that you live in PA - you will need to file a separate PA corporate tax return. Bottom line - reduced filing requirements for a single member LLC. More than just your return, but not as burdensome as a totally separate business could be (such as if you created a Sub S corp).

The easiest way to set up an LLC is to hire somebody to do it. The last thing you want to do is fart around on Pennsylvania's website trying to figure out which forms to file. Trust me, I've looked and then gone and hired a firm to do it for me. It's not very expensive to setup a company. I used this firm, which did a decent job and didn't cost too much:

The Company Corporation Incorporating & LLC Formation - Business Incorporation Service - Incorporate Business | Incorporate.com

I thought they did a decent job. The only think I didn't like was that they wanted to charge me each year to be my agent for PA, which was a waste. I did file a few forms with PA to remove them as my agent and designated myself. All an agent does is gets notices and needs a PA address to get 'em. PA Agents make sense for out of staters, but not people who live in the state. So try to avoid letting The Company Corp designate itself as your agent if you use 'em.

I've glossed over the tax issues here to keep it simple. I recommend followup with a competent tax advisor should you choose to go down the LLC road.

-Tom

[Pohaku]

What Tommy-Boy says is pretty much on the money. I would point out, however, that even if you don't currently have significant non-exempt assets, a claim can be made against your future earnings and assets. Witness the continuous pursuit by the Goldmans of OJ Simpson's assets. You need to see specifically what your state considers to be exempt assets since it varies from state to state.

Most of my small business clients elect to be LLCs these days, especially if they are sole owner entities. The documents can be very simple for sole owner LLCs as you really only need Articles of Organization. Things get more complicated if there are multiple owners as you then ought to have an Operating Agreement and a Member Control Agreement to govern how the Company operates and the buy-sell terms between Members. Taxation for a single Member LLC is also fairly straightforward if you elect to be treated as a disregarded entity - in that there is no separate federal income tax filing and and all gains and losses are deemed passed through to you personally. If you live and work in the state in which you organize your LLC, you may as well be the registered agent for the company. Usually no point in hiring anyone else to do it.

Ultimately you ought to have an attorney/tax adviser in your own state work with you on this, but feel free to PM me if you have questions, the meter isn't running.

[NorseHorse]

http://www.gearslutz.com/board/so-mu...ted-cases.html

[CZ101]

Originally Posted by echoromeo

I am pondering setting up a small remote/freelance project. Do most of you create an LLC?

Thanks.

What did you decide to do?

[infiniteposse]

I'm curious myself. I'm going to set this up shortly as well and am interested to know how this turned out.