Im looking to start a LLC need answers

[Swapmeet]

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@jetsfan2013 wrote:

This is some great detailed advice scenery guy! I am in FL as well now, and am in the process of establishing a side business for my web design. I have been weighing the options of LLC vs S Corp., not thinking about the sole prop option. My concern was personal liability, as I have not heard being a sole prop you are covered. Is that true?

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This is absolutely true. You can get insurance, but if you are sued over and beyond what your insurance covers then you are liable. Liability is my chief concern since my real (not paper) investments include real estate that is leased out to the general public. There are so many things that can happen on a rental property that I would never consider being a sole proprietor. I think that Sceneryguy is absolutely correct in his advice to the OP. One must look closely and objectively at one's own venture, and decide what would work for their situation. Further, one can always change the business type if their needs change. 

In my situation, I wanted to form a different entity that is separate and distinct from me--protecting myself completely from any liability. Since there are separate facets of my investment strategy, there are separate LLCs that operate those. So I have one LLC that acts as the holding company for all other LLCs. Each property is held by its own LLC (formed in Wyoming and operating in CA). This way, my liability for each property is contained. As was mentioned earlier, this creates a decent amount of paperwork. Quickbooks doesn't mind, and when you are bringing in enough money, craigslist has plenty of people that are interested in bi-weekly or monthly bookkeeping jobs which will cost between 100 and 200 bucks per month. 

So each individual investment is owned by its own LLC, and each LLC is owned by the holding company LLC--which I don't even own (that is a different conversation). Take my information with a grain of salt because while I have controlled some C-Corps and several LLCs, the liability issue has always dis-sueded me from being a sole-proprietor--only because I never felt like it would benefit my situation (one with plenty of liability). Once again, one must look at their own situation because being a sole proprietor does sound reasonable for what the OP was talking about doing i.e.. Buying and selling cars.

[scenery_guy]

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@jetsfan2013 wrote:

This is some great detailed advice scenery guy! I am in FL as well now, and am in the process of establishing a side business for my web design. I have been weighing the options of LLC vs S Corp, not thinking about the sole prop option. My concern was personal liability, as I have not heard being a sole prop you are covered. Is that true?

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As Swapmeet detailed above this post one must consider the exposure you are willing to accept when picking the entity. My assets are protected very well and all of my decisions were based on Florida law as that's where I operate. As a SP I am comfortable with my exposure and I carry sufficient insurance for the unexpected. I do some fairly high profile project for some large clients (Superbowls for NBC as an example) so my exposure is huge. Again I am comfortable as I don't put myself in a situation that exposes me more than my plan, and all contracts generated by a client (NBC as an example) go to my lawyer for review and amending. If my changes are not accepted I simply move on, and that rarely happens. 

I'm not sure what liability concerns you have as a web designer but they can't be much. Research the laws in your state, invest in a consultation with a good lawyer who specializes in business law and see what they think. You might be able to have them help you draft a great contract that you use for all clients that serves as a firewall in most circumstances (that's what I did). 

In the end go for the simplest route federal tax wise that gives you comfort. After 22 years doing what I do (thru several companies I formed) I have been sued once, and it was over an overdue bill for supplies that I planned on paying but it seemed our verbal agreement for a delay due to a hardship (customer stiffed me for a little over $100,000K) was not sufficient. The court accepted my earlier proposed terms so the lawsuit just delayed the eventual payment in full by the time it took to go to court.