Elizabeth, you answered my most fundamental question on this video. You are not just a lawyer, but also a professional advisor and mentor. Really happy to find your videos. 👌👍🙏
Elizabeth, thank you, thank you, thank you soooooo much! I was so confuse as to which way to go until I listened to you. You were clear and straight to the point. All my friends who have money making businesses were encouraging me to go LLC; "Go LLC Bro, it's the right way. Good for taxes!" After listening to you Sole Proprietor is the right choice, I am a one owner, one person worker, I have no property or value other than my wife and kids. Thank you Elizabeth! Two (2) Thumbs up!
Honest and nuanced information with context. Thanks so much for making this video. Everyone on TH-cam pushes the "LLC is the only way to go" narrative. I'm guessing a lot of that is due to the money to be made with LLC formation services. I've been binging you videos and found this and the sole proprietorship to LLC conversion video formative and helpful. I'm looking into a side gig making donuts at the local farmers market once a week. Do you think that's small and safe enough if I have insurance? My only assets are a 401k and roth IRA, no property etc. Thanks!
Yep I hear you about the LLCs. Well I'd say when selling food you want to have insurance to cover you in case something happens (someone chokes or is allergic etc).
omg a legit video that's not just "5 reasons not to do a sole proprietorship" and than proceeds to provide shallow in-concise reasons with very few or just poor examples!? liked and subscribed!
Dammm you are very good in explaining! I would love to go as LLC but it requires all my cash to be transferred to my new business and I can’t do that,,, I’ll might transfer in the future until I make my money growth
Hello Elizabeth, thank you for this video! I am a US Army Veteran that is wanting to open a credit repair company. Should I still consider opening up as a sole proprietorship vs a llc? I know there are some risk factors in credit repair. Thought you could guide me a bit. Thank you for your help.
If you're doing a business like credit repair, you need to make sure you have proper disclosures and terms & conditions (or written contracts) with your clients. In any business like that, expectations must be managed so people don't expect a miracle etc. Yes, having an LLC helps too, because if someone does file a lawsuit against you, that's another layer of protection for you personally.
IM starting a business for my brand and family..first one will be an online retail fashion store. I will be getting it going and running it..everything will be done from my house, then shipped to customers. Should I do an LLC or sole..do you think?
Many of my clients start out as a sole to keep things less expensive/simple. The down side, when you have a product-based business, is you are personally liable for all those production / vendor agreements, and any debt you are taking on to purchase inventory. It really depends upon your tolerance for that kind of risk.
Your videos are fantastic! I'm debating between forming an LLC or operating as a sole proprietorship. Sole proprietorship seems appropriate since I have minimal assets and am the sole owner. However, my business involves event rentals such as floral arches. As a sole proprietor, will my tax rate be equivalent to combining my salary with my husband's (we paid about 32% )? I am confused if it is worth or should I form a LLC.
Yes the income gets added on to your family taxes, but don't forget that is just on profit, after deducting expenses. Forming an LLC does not change that.
Great video. If the business is going to be one-person show, from home, but is IT consulting, do you consider that high-risk? A quick inquiry into insurance for liability came back with, "our underwriters don't have an appetite for that", but they were able to offer a quote on unemployment compensation insurance, which is required by the state. I only checked with one carrier so a ton more probably will or perhaps might cover the liability side, any experience dealing with that side of it? In other words, it sounds like going LLC is best for this particular industry (Information Technology to include security) just based on risk alone. Any recommendations on a national insurance carrier for SP or LLC liability insurance? Thanks so much in advance!!! Subscribed!
No I don't have a video on that, but I'll add it to the list. It does come up a lot, both switching from LLC to sole prop as well as how to properly shut down an LLC generally.
Hi, My scenario My wife and I have created a it revocable trust for our home and a revocable trust for our savings both the children are the trustees I currently have an LLC however I am a single owner business and considering going back to sole proprietor because of the fact at the house is already secure and I have no assets and I do not want to pay the state of Massachusetts an additional $500 for record keeping. Any thoughts The business is less than part time work a side hustle if that. The thoughts back in 7-2023 was to register as a LLC and try growing the business. my health condition has put a hold on growing the business unfortunately. Thank you in advance for your feed back
Revokable trusts do not protect the assets from business creditors or other business risks. If you want to protect a house from the business creditors, the business needs to be an LLC or corporation.
Hi Elizabeth. I am a stay-at-home mom. Thinking about selling handmade jewelry. I feel a bit overwhelmed because I really don't know how the business will go and creating an LLC seems to big for me right now. I really would like to test the field before. Do you think selling jewelry online can be risky?
I think if you have good policies (like you provide written terms & disclaimers about shipping, allergies, etc.) and have insurance, then it can make a lot of sense to start out as a sole proprietor and then upgrade to an LLC once you are making more money
Great information! If you paid for things like forming the LLC, the Registered Agent, and logo; should you pay yourself back from the business account?
Well you can handle it a few different ways. You can reimburse yourself, you can just count it as your "capital contribution" to "buy" the membership shares of the LLC, or you can count it as a loan and the LLC pays you back in the future. There's no one right way -- it depends on what makes sense financially/tax-wise
Hi can you help if you have an LLC and you have Court violations towards the LLC and you're planning to dissolve to put as a sole proprietorship can you do that and can the violations go towards your own name as owner sole proprietorship so you can address the violations in your own name because as LLC you cannot represent yourself or your company you can only represent yourself in your name so was going to go back to sole proprietorship anyway might as well do it now can you verify what the violations currently also be transferred to my name or no?
Hm in theory the sole prop can be the successor in interest of the LLC and buy the assets/liabilities, but not sure if that will work with whatever government gave the court order -- there may be an order to not dissolve the LLC. Might need to have the LLC declare bankruptcy to shut it down.
Hi Elizabeth. As someone who’s is interested in turning a side hustle with photography in a small business. Nothing crazy just casually shooting sr pics or family photos now and again. Does it make since to go straight to llc if I am not earning loads of cash. Would a sole proprietor be okay with issuance, just in case. I have my full time job and just want to be legit, rather than doing it on the side. Thank you.
hi I have a question. Iam starting two businesses but under two different DBA'S they are both in sells, one is a clothing store and the other is a candy shop/ food services. I have a sellers permit do I need an addition sellers permit per business? or just two additional DBA'S? both under sole proprietor.
Ihave 4 mobile homes and thinking to do an llc,(just me ) and transfer title to llc ,it is worth it or beneficial? I'm thinking of doing it to grow in both side and try to get a BLOC too
I've heard mixed opinions as to whether or not an LLC actually protects one's personal assets. I'm in Oklahoma and unfortunately find this question very confusing. Thanks for sharing your perspective.
My understanding is that when you form an LLC you'd start over with a new credit rating so you'd need a new number, but check with Duns & Bradstreet to confirm www.dnb.com/contact-us.html
Im leaning more toward sole proprietor now that ive watched your video. But what would you recommend for starting a small landscaping business? I don't know how successful the buisness would be so i dont want to get an llc off the bat. Great video with a lot of great advice. Thank you
Well landscaping does have some risk since usually have employees and people can get injured, so if don't want to get an LLC then make sure you have adequate insurance to cover those risks
Would you recommend a llc or sole prop for mentoring, coaching, and tutoring? I also asked this because the name for the LLC and the Sole are different. I really dont want to use my name or the DBA. I also dont want to get caught up with a tax issue with the LLC if im just starting out. My great advisor and many friends of mine have LLCs. A couple in the fields mentioned above are sole. Can you advise who provided the limited protection if sued by the LLC? Thank you in advance.
You can have a one-owner LLC that is taxed as a sole proprietor, which can keep the tax situation simple when you start out. For some of my clients starting a service-based business like coaching, they begin as a sole proprietor and then convert to an LLC when they make more money. You can have good contracts and insurance to handle some of the risk of being a sole proprietor.
Oh my goodness THANK YOU! I have been watching some of your videos to help as I try to get started and each one helps more than the last! I felt my anxiety rising because I do have assets to cover and do events but I am just starting out and making hardly any money so I was almost panicking but phew 😅 you ended it with converting after a time so 👏🏽👏🏽👏🏽 to you
Just means that both businesses are liable to each other for debts / lawsuits (and you are personally responsible too). It can make sense to do that in the beginning when you are still testing an idea, to save money.
Thank you so much. I so glad you are providing this information. I've been going back and forth for far too long with what to do...especially because we own a home now. However, I'm just starting out as a consultant and mostly online for now (due to the world events). However, I want to eventually do engagements in the future. So the 6 month starter I believe is the best option for me. Having an asset, would you advise the same? I really appreciate this. New subbie. PS. Would this also affect my husband's business?
Make sure you mitigate the risk by having solid contracts, insurance, and being picky about the clients to take (to avoid drama). If your husband's business is also a sole prop, then yes generally everything is liable for each other. But if it is an LLC or corporation, it is separate.
Thank you so much for sharing this! Question: I am currently a sole proprietor and have a number of businesses - freelance interior designer with other designers, interior design, art photography, and I let out my house on Airbnb. My Schedule C's are elaborate! I don't own a house but live in my house of trust and have no employees. Should I transfer to an LLC or stay SP?
Hm switching to an LLC won't make it more simple really. I'd look at whether you'd get a tax savings from having an LLC-taxed-as-an-S-Corp ... whether you would really depends upon your exact income/expenses (great idea to have a tax person run the numbers).
Thanks for sharing this video, Elizabeth. Should I start a sole proprietorship if I'm doing affiliate marketing and print on demand business? Meaning I upload graphics to a another companies website and they buy the product ex ( it can be a tshirt, a mug, an apron) etc. The company ships it out to the customer and that's it. Would it be better to start a sole proprietorship instead? I have no assets. I basically have a shopping mall with this company, am I'm also an affiliate for the company as well. If a customer wants to return an item for example? They will have to send it back to the company, not me. If they have customer service problems they call the company I'm affiliated with. If the customer wants to order in bulk, they call the company that my graphics are sold from which is my store. Do you think it's better to have a sole proprietorship???
Sole proprietorships are cheaper/easier in the beginning, so many of my clients starting out in an affiliate-type business, with no inventory, will choose the sole p. The risk is that if you are taking on any debt (loan or credit cards), or if something goes horribly wrong with the main company, you are personally liable (so make sure you have a good contract with them that doesn't hold you liable for stuff). I think the other potential risk is if any of your graphics are infringing on someone's copyright.
You made it simple and understanding. I'm sure you get asked same question about LLC or Sole Proprietor. Based on your experience and clients you have what would work out if I'm staring a used dealer selling autos at a very very small location, LLC or Sole Proprietor? It just be me (wife and children as support) and no owned property or investments.
Hm for selling used cars I'd recommend an LLC -- there's a fair amount of risk because people physically there & test driving cars, and also people mad about a car & trying to sue. You should also get insurance too but an LLC will help shield your family from that risk.
Thanks for the good video and explanation. I am planning to start a mgmt. consulting business, if I want a name for the business does it have to be an LLC or can I still have a name and be a sole proprietorship? Thanks in advance.
If you are a sole proprietorship (a one-person owner business and you don't have a corporation/LLC) then yes you file for the fictitious business name with you personally/individually as the owner of the DBA/name.
@@ElizabethPW do you have to file paperwork for the dba if you are not using your name. I see where some people have and some people have not. I dont want to get taxed heavily and Im not making any money.
My question is I already have an Llc for a boutique but I have a financial literacy business as well would you suggest getting another Llc and ein for that business or can I operate that side under my boutique Llc
You can operate as a side gig. The main issue is that each business is liable for the other. So you just need to be okay with that, and make sure to have insurance that covers the risks etc.
Hi quick question I see you do respond even though thos is a older video hope you respond but just my luck you won't respond to mine lol..let's try my luck. Ok so I have a hobby of making products and I want to sell online..at pop ups and to friends and family..my products are safe and organic and cruelty free I believe I should be ok with being a sole proprietor what do you think? I'm just starting and I wanna keep it simple and cheap to start. I don't wanna invest alot of money into a llc and I get bored and decide I don't feel like found it anymore. So sole proprietorship would that be best in your opinion?
If your top priority is saving money, yes be a sole prop but get product liability insurance. Here's one resource: www.nextinsurance.com/product-liability-insurance/
This is just awesome info and great help for newbies like who are thinking of starting a business. What would you recommend an online guitar case - manufacturing and selling business? Thank you so much for these videos and for any tip/suggestions. Thank you again!
Glad it was helpful! Hm if you are manufacturing products, I assume that you will have inventory and contracts with the factories etc. That may be a good case for an LLC, because there's potential liability if something goes wrong with those agreements, if there's unsold inventory, if inventory gets lost or damaged in shipping, delays in shipping and customers want refunds, etc.
@@ElizabethPW Thank you again Elizabeth. I mistakenly wrote 'manufacturing', I will actually have the cases manufactured in India and then shipped to USA for online selling? Do you think I can start with sole proprietor or LLC will be a good idea since it involves international dealings? Thank so much I am totally lost on this hah..
It really depends on your tolerance for risk. Starting as a solo will be less expensive / hassle but the LLC offers you personal asset protection from the business
I started y business in September 2022, i have no employees and I am not making money yet. I do pop-up events and I do carry a BOP. I was thinking of doing an LLC but when I heard there is $800 annual fee in California that I can't afford. Does this fee vary in California and is forming a corporation an option (not sure what fees are involved)
The $800/year annual franchise fee (minimum tax) is for both LLCs and Corporations. There is currently a rule that the first *calendar* year it is waived. Assuming you have adequate insurance and have people sign contracts / waivers, it may make sense to just stay as a sole prop until you are making money and can afford the LLC or Corporation setup and fees.
Thank you for the informative videos, they are very helpful. I have a question, I have started going to thrift stores and garage sales and reselling on eBay as a side gig. I have recently seen videos about big companies suing resellers with some kind of trademark angle even though it’s a legally purchased item. Any way with that in mind do you think it would be wise to get an llc for the protection and peace of mind? Does an llc even protect against anything like that? I wouldn’t want my reselling hobby to impact my family if a company decided do something like that however unlikely it may be.
Sounds like you got an EIN (tax id number) as a sole proprietor. You can totally do your business like that. Or, you can form the legal entity LLC (which would get its own EIN / tax id number) to have more liability protection.
I am a truck driver and i am getting pay by 1099, company provide me the truck, fuel, insurance, i only have to pay is for my food. I was planning to open a LLC, but this lady told me to open an INC , S-Corp,. That is better for taxes purposes. Now that ive been watching ur video and others video, i realized that i can do a Sole-Propiertoship or LLC.. what u recommend me? Thanks in advance
You could open an LLC taxed as an S-Corp. In many ways it is the best of both worlds (LLCs are a bit more simple, but you get the tax benefits of an S-Corp). You want someone who has your exact financials in front of them to tell you whether the tax savings makes sense in your particular situation.
Elizabeth, Great Information! I want to do online business and continue as sole proprietor until I figure out the Business works or not. Bought the items needed for Business through personal account.What forms I need to fill out in this case and can I deduct my expenses here? If so, they need to be itemized in 1040 schedule c. Thanks for your help on this?
If you are starting as a sole prop then yes you will put them on your 1040 schedule C and they will be deducted against the business income. You'd want to keep a good record of your expenses in a bookkeeping system or at least a spreadsheet or notebook.
Hi Elizabeth! Thanks for te awesome video. I am a hobby woodworker with a full time job. I have recently started building small pieces and will start selling them at various markets. I have a home, a nice savings, and multiple vehicles. Do you think llc would be best in my situation?
Hi.. I am a Licensed massage therapist. I am about to start my own Body contouring business. It's non invasive,..... what is the best way for me to go.. Sole or LLC? Thanks
Check with the rules of your state -- in some states if you have a professional license you have to either be a sole proprietor or have a special business entity ("professional corporation" or "professional LLC"). Those rules are where you need to start.
Hi Elizabeth. Great video and information. I am going to set up a DBA and I will be getting errors and omissions insurance. This is for my notary and insurance business. I am the only employee thus far. Do you recommend DBA with E&O Insurance or does LLC sound safer?
Hm right for a notary business, you get E&O insurance for the biggest risks (mistake in the notarization). Also consider regular business liability insurance, to cover other stuff like a customer slipping-and-falling. LLC does add a bit of protection too, and that's more about your comfort level vs the expense of a CA LLC (including the $800/year franchise fee tax).
I currently have a sole proprietorship under my personal name, but I want to create a LLC with a official buisness name. I have a EIN. I also have established several vendor accounts. Would I have to get a new EIN, and start over building vendor accounts?
Yes the LLC will be a different legal entity, so it will need its own EIN. As far as vendors, it really depends upon them -- they might let you transfer it to the new entity.
Thank you so much for your videos, it was very helpful ! I am on my way to starting a Recruiting Agency, where I connect employees and employers for long term placement or short term placement. I Will be doing it from home and I might get a partner as the business will grow along the way. In his situation would I need any insurance ? Since I don’t have any employees? And between Sole proprietorship and LLC what would be the best for my type of business?
I recommend always getting general business insurance, probably something called "business owner's" policy that has a bunch of stuff included. Since you are just starting out, you probably don't need much tax planning yet, so you'd look at the risk/liability issues for whether you want to protect your personal assets from the business' liabilities. Also think about whether your potential clients would be more comfortable hiring an LLC vs a sole proprietorship (many larger companies want to only hire an LLC or corporation).
Hi Elizabeth, I run an Airbnb from the second story apartment of my own home. Trying to figure out if it makes sense for me to form an LLC to protect my biggest asset. Some people say that the protection I get from Airbnb and my own personal short term rental insurance is enough but others have said I should form an LLC. Would love to get your opinion.
Hi Elizabeth! Thank you for this video, so straightforward and helpful. I am looking into creating my own Nanny Referral Agency in near future. I’m 21 years old, and always dreamt of having something of my own. I plan on serving people locally. Do you suggest an LLC or Sole Proprietorship? Thanks!
You're welcome! Hm a nanny referral agency may be.a good example of a business where it makes sense to start out as an LLC, because you have increased liability. If you refer someone who does something wonky, you don't want the parents to come back and hold you personally liable. Obviously you also want contracts/releases and insurance to protect you, but since parents (especially wealthy ones) can be over-the-top, protecting yourself as much as possible is a good strategy.
@@ElizabethPW yes thank you for confirming that. I guess I’m more hesitant of the amount of documents because I’m new to this, but I know that’s apart of the process!
Thanks for the valuable information! I’m sure I want to have an LLC for my new business, should I have a single-member LLC? Or should I include at least one more person to get some benefits?
The big issue is honoring corporate formalities (separate bank account, paperwork, don’t commingle or use biz money for personal stuff). That’s why some single member LLCs have trouble - they don’t keep it proper & formal.
@@tishshamiller I just recorded a video about the common mistakes LLC owners make, including the formal paperwork issue - it will be coming in a week or two
This video is super helpful! I am wondering if I should be a sole proprietor or LLC for my business. I am a contractor who does UX/UI design work (seems pretty low risk). The income is decent this year but may not be as high next year if I find a full time job. I do have personal assets which I would like to protect. Should I go the LLC route even though I may not have much income next year and my work is pretty low risk for debt or lawsuits? If I start as a sole proprietor with a dba name, can I use the same dba name for my LLC if I want to change structure later? Or do I have to use a different name for my LLC because it's been registered with my state business license as that name?
I'll answer the easy question first -- as long as the name is available, you can use the same name for the LLC as your current DBA. Hm it really is a personal comfort level for whether you need the LLC - I do agree that UX/UI is fairly low, except for intellectual property disputes about design or code. If you go the sole prop route to save money and make it simple, make sure you get business liability insurance and have a written contract with every client.
For a notary public or any other licensed professional, you'll want to get errors and omissions / malpractice insurance to cover you for liability from your work. Otherwise, getting an LLC depends upon whether you want extra liability protection (depends upon your tolerance for risk) and if you need the tax planning.
Hi for a Carpet Cleaning business, Sole Proprietorship or LLC. I would be the only owner and would be the only person working the business for now. Thanks.
When someone is starting a one-person business (they are the only owner and only worker), it is common to start it as a sole proprietorship to save money and complexity. The only issue is that there isn't liability protection from anything that happens -- ways to deal with that risk is to have good contracts with clients/customers and to have business insurance.
My question is I want to start a contracting business and buying houses, fixing them up and selling more like home renovations. What would be the best for me starting off
It depends on how you will be financing. It would be great to have an LLC and use that, but it may be hard for a brand-new LLC to get the financing since it does not have a credit rating yet
Confirming your saying I don't need a licenses or business permits with a Sole Proprietor? All I found was this which kind of halfway answers the question but not fully: A general business license is not required in Texas. However, it is important to determine necessary licenses, permits, certifications, registrations or authorizations for a specific business activity, at the federal, state and local level.
Whether or not you need a business license or permit has nothing to do whether the business is a sole prop or an LLC/corporation. In Texas, there isn't a general business license, but many industries / types of business need a permit or license. Here's a guide for that: gov.texas.gov/uploads/files/business/2020TexasLicensesPermits.pdf
Elizabeth, thanks so much for this video, more helpful than anything else I've found online. Two questions if I may; I am starting a sales organization that will require me to hire independent contractors, no direct employees and no real risk, do I really need an LLC? AND, I will have a second DBA and would like to open two distinct bank accounts and I understand I can do that with one EIN as long as they are both sole props? Thanks so much for your channel, you are providing a great service!
For that type of business, you'd want to make sure to have well-written contracts so the contractors are indy contractors *for sure* and also require them to have insurance, business license (if they need that) etc. in the contract. Yes you can have multiple bank accounts for each DBA (with one EIN). Well unless that bank has some weird rule but that would not make sense.
Hi thanks for the video, very helpful! What do you suggest for a small business for Tie Dye DIY Kit that planning to start in few months? LLC or sole proprietorship? Live in LA County, Cali. Would you suggest to form LLC from Jan 1st 2022 as it's almost Q4? Than you.
If you are not going to get your business up--and-running until 1/1/2022 then yes it can be good to register it so it is effective as of 1/1/2022, so you can use 2022 as your "first year" (and get the $800 franchise fee tax waiver for that year). For a product business, it depends upon whether you are making them yourself or if you are ordering/manufacturing a lot of inventory -- when someone has lots of inventory, having an LLC can protect you in case you are not able to sell the inventory.
Hi, I opened a flower shop and I wasn’t sure about sole or LLC so I applied for sole now listening to this I cancel my EIN and apply all over again for a LLC? did I do the correct thing?
You wouldn't need to cancel the EIN (you can keep it in case you want to use it later for something else). For a business that is going to have a physical location and employees, I usually recommend an LLC since there's a fair number of liability issues. You can get insurance for many of them of course, but there are some things that are not possible to insure against.
Hello. A blogger here. In regards to the GDPR and CCPA privacy laws and possible liability that could come with them what is your take on LLC vs. Sole Proprietor for someone just starting out with a blog? Thank you for your time.
Really I'd focus on having a Privacy Policy that complies with GDPR/CCPA first (since you'd need that as a sole prop or an LLC). But yes, having an LLC helps to protect you personally, if you mess up compliance. Note: CCPA would rarely apply to a new blogger (it applies to biz that make over $25M, sell/buy 50K info, or get 50% revenue from selling info). Compliance tends to only be a big issue for bloggers who buy or sell lists.
Hello, Thank you so much for the video! I have an 8-5pm job as a graphic designer in Tx and I'm also a freelance graphic designer, videographer and photographer. I plan to invest more time in my side hustles ( which don't make much income yet). I'm wondering which could be more beneficial for Taxes wise now. I want to set up a single-member LLC for legal matters but it might be more headache to set it up compared to Sole Proprietorship. Any advice in this case? Thanks for your helping hands.
For taxes, typically there isn't a big savings by being an LLC vs a sole prop until you are making enough money where being taxed as an S Corp makes sense (usually high five figures of profit, since the S Corp tax status also comes with more admin and costs).
Really appreciate this information. If I had a stock trading business, no employees or clients, just earning income trading for myself, would l always need to be a sole proprietor or would an LLC be necessary based on how much income is made? Also, would liability insurance NOT be needed with this type of business? I can’t think of what type of liability this type of business would create since there would be no clients or employees but thought I would ask. Thank you!
You may want an LLC or Corporation, to take advantage of S Corp tax savings (if you are making enough money). One aspect of liability insurance is that if your homeowners/renters insurance company learns you have a business with no insurance, they may cancel your policy. That's a good reason to get business insurance, if nothing else.
Some of those forms and definitions are confusing. You may find those definitions in the Ordinances (like laws or regulations) for the city/county where you are applying for the license. Otherwise I'd suggest emailing or calling their office.
Hi what do you suggest for a small concrete contractor sole proprietor, Im not sure to be LLC -S corp my prediction is to be making about 60k this year. And I do have assets. Whats your best recommendation?
A construction business is a good example where having an LLC/S-Corp is helpful to protect your personal assets from liability, especially if you have employees/workers. Obviously you also want to have insurance, but there are so many potential legal problems from that type of industry, due to the physicalness of the job.
You can start with an LLC, and then if you need to have a different tax status later, you can have it be an "LLC taxed as an S Corp" or "LLC taxed as a C Corp"
Question: CD Baby is a service that helps distribute your music to Spotify iTunes, etc. they currently want their artist to select “a business type” I’m an independent artist. Should I be a Sole Proprietorship since it’s strictly just me? Or should I be an LLC?
Most independent artists start out as a sole prop, and then only incorporate when it is a tax savings. The main big risk aspect is if someone is sampling or otherwise doing something else that could have copyright disputes -- then it can make sense to form an LLC earlier rather than later.
Hi Elizabeth I’m currently a sole proprietor since 2019 I’m so confused and don’t know which route to go with between C Corp or S Corp what do you recommend
Thank you so much 🙏🙏, I am planning to start a small clothing bussiness and am very much confused about the permits I need . This video is very helpful.
Thank you!!! I'm so happy, I seen this video before apply for my LLC. I buy hair from vendors overseas and using the product to make my own custom wig. I am using my own ordinary everyday income to make this investment. I am trying to get my self to a passive income to pay for those investments. In your opinion, starting out do you think a sole proprietor or LLC will be the better fit for me ??? Some of my customers who purchase my wigs, get an install. Im just not sure if my business is a high risk factor where i'll need liability from the LLC, at the moment.
It's a great question! Hm I'd look at how much money you are investing in this business, including how much credit the business will have. For example, some businesses have to order a lot of materials on credit, so if the products don't sell, they still owe for those materials. Some of the risk with the customers can be handled with insurance (like liability insurance if someone slips-and-falls at an appointment).
I own a party rental business and right now my kids and myself are the only workers. Is it necessary to go for an LLC or remain solely? I would also like to start business credit?
Hm if you want to have the business build credit, then it needs to be its own legal entity - so either an LLC or corporation. Otherwise, if it is a sole prop then it is really just your credit.
When selling products to be consumed like raw herbs, it can make sense to be an LLC to help with any liability from the customers consuming the products.
Hi Elizabeth.I watched your videos about LLC but got a question in my mind that in case of PARTHNERSHIP LLC where should be mentioned the names of the partners?
If you form an LLC, the owners of the LLC are typically named in an annual filing with the state, usually called an annual report. In California it is called a Statement of Information and is required for LLCs every other year.
Elizabeth, you answered my most fundamental question on this video. You are not just a lawyer, but also a professional advisor and mentor. Really happy to find your videos. 👌👍🙏
You are so welcome!
yes you answer mines tooo@@ElizabethPW
This has got the be the most clear, concise and complete video on the topic! Thank you!
You're welcome! :)
I Agree.
Elizabeth, thank you, thank you, thank you soooooo much! I was so confuse as to which way to go until I listened to you. You were clear and straight to the point. All my friends who have money making businesses were encouraging me to go LLC; "Go LLC Bro, it's the right way. Good for taxes!" After listening to you Sole Proprietor is the right choice, I am a one owner, one person worker, I have no property or value other than my wife and kids. Thank you Elizabeth! Two (2) Thumbs up!
Glad you found it helpful! :)
Right, everyone is so pushy about getting a LLC, sole prop it’s is
Honest and nuanced information with context. Thanks so much for making this video. Everyone on TH-cam pushes the "LLC is the only way to go" narrative. I'm guessing a lot of that is due to the money to be made with LLC formation services. I've been binging you videos and found this and the sole proprietorship to LLC conversion video formative and helpful. I'm looking into a side gig making donuts at the local farmers market once a week. Do you think that's small and safe enough if I have insurance? My only assets are a 401k and roth IRA, no property etc. Thanks!
Yep I hear you about the LLCs. Well I'd say when selling food you want to have insurance to cover you in case something happens (someone chokes or is allergic etc).
I only clicked on your because of your last name. I knew you meant business
omg a legit video that's not just "5 reasons not to do a sole proprietorship" and than proceeds to provide shallow in-concise reasons with very few or just poor examples!? liked and subscribed!
Glad you liked it!
Dammm you are very good in explaining! I would love to go as LLC but it requires all my cash to be transferred to my new business and I can’t do that,,, I’ll might transfer in the future until I make my money growth
Hello Elizabeth, thank you for this video! I am a US Army Veteran that is wanting to open a credit repair company. Should I still consider opening up as a sole proprietorship vs a llc? I know there are some risk factors in credit repair. Thought you could guide me a bit. Thank you for your help.
If you're doing a business like credit repair, you need to make sure you have proper disclosures and terms & conditions (or written contracts) with your clients. In any business like that, expectations must be managed so people don't expect a miracle etc. Yes, having an LLC helps too, because if someone does file a lawsuit against you, that's another layer of protection for you personally.
IM starting a business for my brand and family..first one will be an online retail fashion store. I will be getting it going and running it..everything will be done from my house, then shipped to customers. Should I do an LLC or sole..do you think?
Many of my clients start out as a sole to keep things less expensive/simple. The down side, when you have a product-based business, is you are personally liable for all those production / vendor agreements, and any debt you are taking on to purchase inventory. It really depends upon your tolerance for that kind of risk.
Great i see this i have just Did a quote For my LLC ... but because I sell product I went for my LLC
Good to hear that the video was helpful! That makes sense.
Hi I am thinking to start my sole proprietor business of jewellery. I make artificial jewellery. Need guidance.
Not sure of your question? I'm not taking new clients right now but you can get on the waiting list here elizabeth@elizabethpw.com
Peace.. Shalom.. Salam.. La Paz.. Namaste ..
🙏🏻 😊 🌈 ✌ ☮️ ❤️ 🕊
Your videos are fantastic! I'm debating between forming an LLC or operating as a sole proprietorship. Sole proprietorship seems appropriate since I have minimal assets and am the sole owner. However, my business involves event rentals such as floral arches. As a sole proprietor, will my tax rate be equivalent to combining my salary with my husband's (we paid about 32% )? I am confused if it is worth or should I form a LLC.
Yes the income gets added on to your family taxes, but don't forget that is just on profit, after deducting expenses. Forming an LLC does not change that.
Great video. If the business is going to be one-person show, from home, but is IT consulting, do you consider that high-risk? A quick inquiry into insurance for liability came back with, "our underwriters don't have an appetite for that", but they were able to offer a quote on unemployment compensation insurance, which is required by the state. I only checked with one carrier so a ton more probably will or perhaps might cover the liability side, any experience dealing with that side of it? In other words, it sounds like going LLC is best for this particular industry (Information Technology to include security) just based on risk alone. Any recommendations on a national insurance carrier for SP or LLC liability insurance? Thanks so much in advance!!! Subscribed!
No, I don't consider consulting high-risk, but have a good written contract and insurance. I use Next Insurance
Hi Elizabeth love your videos they’ve all been so helpful! Do you have a video on how to switch from LLC to sole proprietor?
No I don't have a video on that, but I'll add it to the list. It does come up a lot, both switching from LLC to sole prop as well as how to properly shut down an LLC generally.
Hi,
My scenario
My wife and I have created a it revocable trust for our home and a revocable trust for our savings both the children are the trustees I currently have an LLC however I am a single owner business and considering going back to sole proprietor because of the fact at the house is already secure and I have no assets and I do not want to pay the state of Massachusetts an additional $500 for record keeping.
Any thoughts
The business is less than part time work a side hustle if that.
The thoughts back in 7-2023 was to register as a LLC and try growing the business. my health condition has put a hold on growing the business unfortunately.
Thank you in advance for your feed back
Revokable trusts do not protect the assets from business creditors or other business risks. If you want to protect a house from the business creditors, the business needs to be an LLC or corporation.
Hi Elizabeth, I cook and sell food within my home, but would like to open a small family restaurant with no employees, what would you suggest???
Hm for a food business I'd form an LLC because there's a lot of potential risk there
Thank you so much for this 🙏
Hi Elizabeth. I am a stay-at-home mom. Thinking about selling handmade jewelry. I feel a bit overwhelmed because I really don't know how the business will go and creating an LLC seems to big for me right now. I really would like to test the field before. Do you think selling jewelry online can be risky?
I think if you have good policies (like you provide written terms & disclaimers about shipping, allergies, etc.) and have insurance, then it can make a lot of sense to start out as a sole proprietor and then upgrade to an LLC once you are making more money
Great information! If you paid for things like forming the LLC, the Registered Agent, and logo; should you pay yourself back from the business account?
Well you can handle it a few different ways. You can reimburse yourself, you can just count it as your "capital contribution" to "buy" the membership shares of the LLC, or you can count it as a loan and the LLC pays you back in the future. There's no one right way -- it depends on what makes sense financially/tax-wise
@@ElizabethPW Wow! Thank you for answering so thoroughly!
Hi can you help if you have an LLC and you have Court violations towards the LLC and you're planning to dissolve to put as a sole proprietorship can you do that and can the violations go towards your own name as owner sole proprietorship so you can address the violations in your own name because as LLC you cannot represent yourself or your company you can only represent yourself in your name so was going to go back to sole proprietorship anyway might as well do it now can you verify what the violations currently also be transferred to my name or no?
Hm in theory the sole prop can be the successor in interest of the LLC and buy the assets/liabilities, but not sure if that will work with whatever government gave the court order -- there may be an order to not dissolve the LLC. Might need to have the LLC declare bankruptcy to shut it down.
Hi Elizabeth. As someone who’s is interested in turning a side hustle with photography in a small business. Nothing crazy just casually shooting sr pics or family photos now and again. Does it make since to go straight to llc if I am not earning loads of cash. Would a sole proprietor be okay with issuance, just in case. I have my full time job and just want to be legit, rather than doing it on the side. Thank you.
It can make sense to just do a sole prop with insurance, and have contracts. It does depend on your tolerance for risk
hi I have a question. Iam starting two businesses but under two different DBA'S they are both in sells, one is a clothing store and the other is a candy shop/ food services. I have a sellers permit do I need an addition sellers permit per business? or just two additional DBA'S? both under sole proprietor.
My understanding is that you have one seller's permit but you need to add the additional info. But ask them to check 1-800-400-7115
Ihave 4 mobile homes and thinking to do an llc,(just me ) and transfer title to llc ,it is worth it or beneficial? I'm thinking of doing it to grow in both side and try to get a BLOC too
That may be helpful to protect against risk, but also make sure to have insurance
I've heard mixed opinions as to whether or not an LLC actually protects one's personal assets. I'm in Oklahoma and unfortunately find this question very confusing. Thanks for sharing your perspective.
Welcome! Yes there's a lot out there that confuse the issues
Do you have to get a new duns number when changing your LLC from sole proprietor to LLC
My understanding is that when you form an LLC you'd start over with a new credit rating so you'd need a new number, but check with Duns & Bradstreet to confirm www.dnb.com/contact-us.html
Im leaning more toward sole proprietor now that ive watched your video. But what would you recommend for starting a small landscaping business? I don't know how successful the buisness would be so i dont want to get an llc off the bat. Great video with a lot of great advice. Thank you
Well landscaping does have some risk since usually have employees and people can get injured, so if don't want to get an LLC then make sure you have adequate insurance to cover those risks
@@ElizabethPW awesome thank you so much! Your videos are really educational
how about if I am trying to start building credit? should I stay sole prop or go llc?
If you build credit as a sole prop, it will not transfer to the LLC. So start with what you want in the end, if building credit is important
Would you recommend a llc or sole prop for mentoring, coaching, and tutoring? I also asked this because the name for the LLC and the Sole are different. I really dont want to use my name or the DBA. I also dont want to get caught up with a tax issue with the LLC if im just starting out. My great advisor and many friends of mine have LLCs. A couple in the fields mentioned above are sole. Can you advise who provided the limited protection if sued by the LLC? Thank you in advance.
You can have a one-owner LLC that is taxed as a sole proprietor, which can keep the tax situation simple when you start out. For some of my clients starting a service-based business like coaching, they begin as a sole proprietor and then convert to an LLC when they make more money. You can have good contracts and insurance to handle some of the risk of being a sole proprietor.
@@ElizabethPW thank you very much. Which website builder do you recommend-wix, fiver, ect?
@@tishshamiller I don't have a website builder that I recommend really (I personally have a website based on wordpress, hosted at wpengine)
At what point financially do we decide between LLC and S-corp for real estate?
I typically do S Corp when the business makes mid-high five figures of taxable profits
Oh my goodness THANK YOU! I have been watching some of your videos to help as I try to get started and each one helps more than the last! I felt my anxiety rising because I do have assets to cover and do events but I am just starting out and making hardly any money so I was almost panicking but phew 😅 you ended it with converting after a time so 👏🏽👏🏽👏🏽 to you
That's great to hear! Glad I could help.
Hi!!
What about an tshirt e-commerce biz? I started two and I decided on sole proprietorship. Is this wise?
Just means that both businesses are liable to each other for debts / lawsuits (and you are personally responsible too). It can make sense to do that in the beginning when you are still testing an idea, to save money.
how do you decided how much you pay yourself?? or is it a law or limit?
th-cam.com/video/cv_cXHVa0xU/w-d-xo.html and th-cam.com/video/UTwQ-THsdFM/w-d-xo.html
Very helpful and straight to the point, thank you
You're welcome, glad it was helpful!
Love your content! Thx for tbe great info
Glad you enjoy it!
You are amazing, was so hard to find this information like u said, most don't realize what they get themselves into.
Great to hear!
Do I need to apply for EIN when I first started off a business?
If you start as a sole proprietorship, you can just use your SSN
Thank you for the clarity,
I do have a question.
As a sole proprietorship, can I get a EIN # for my photography business?
Yep you can get an EIN for your sole proprietorship, and it is a good idea. Here's a video about that: th-cam.com/video/1fL9v85_8uw/w-d-xo.html
What are the steps to converting from soleprop to llc?
th-cam.com/video/iI7wyWBB8yY/w-d-xo.html
Thank you so much. I so glad you are providing this information. I've been going back and forth for far too long with what to do...especially because we own a home now. However, I'm just starting out as a consultant and mostly online for now (due to the world events). However, I want to eventually do engagements in the future. So the 6 month starter I believe is the best option for me. Having an asset, would you advise the same? I really appreciate this. New subbie.
PS. Would this also affect my husband's business?
Make sure you mitigate the risk by having solid contracts, insurance, and being picky about the clients to take (to avoid drama). If your husband's business is also a sole prop, then yes generally everything is liable for each other. But if it is an LLC or corporation, it is separate.
Thank you so much for sharing this! Question: I am currently a sole proprietor and have a number of businesses - freelance interior designer with other designers, interior design, art photography, and I let out my house on Airbnb. My Schedule C's are elaborate! I don't own a house but live in my house of trust and have no employees. Should I transfer to an LLC or stay SP?
Hm switching to an LLC won't make it more simple really. I'd look at whether you'd get a tax savings from having an LLC-taxed-as-an-S-Corp ... whether you would really depends upon your exact income/expenses (great idea to have a tax person run the numbers).
Ok this video definitely taking some stress off of me whew thank you
I'm so glad!
Thanks for sharing this video, Elizabeth. Should I start a sole proprietorship if I'm doing affiliate marketing and print on demand business?
Meaning I upload graphics to a another companies website and they buy the product ex ( it can be a tshirt, a mug, an apron) etc.
The company ships it out to the customer and that's it. Would it be better to start a sole proprietorship instead? I have no assets.
I basically have a shopping mall with this company, am I'm also an affiliate for the company as well. If a customer wants to return an item for example? They will have to send it back to the company, not me. If they have customer service problems they call the company I'm affiliated with.
If the customer wants to order in bulk, they call the company that my graphics are sold from which is my store. Do you think it's better to have a sole proprietorship???
Sole proprietorships are cheaper/easier in the beginning, so many of my clients starting out in an affiliate-type business, with no inventory, will choose the sole p. The risk is that if you are taking on any debt (loan or credit cards), or if something goes horribly wrong with the main company, you are personally liable (so make sure you have a good contract with them that doesn't hold you liable for stuff). I think the other potential risk is if any of your graphics are infringing on someone's copyright.
You made it simple and understanding. I'm sure you get asked same question about LLC or Sole Proprietor. Based on your experience and clients you have what would work out if I'm staring a used dealer selling autos at a very very small location, LLC or Sole Proprietor? It just be me (wife and children as support) and no owned property or investments.
Hm for selling used cars I'd recommend an LLC -- there's a fair amount of risk because people physically there & test driving cars, and also people mad about a car & trying to sue. You should also get insurance too but an LLC will help shield your family from that risk.
@@ElizabethPW Thank you for your prompt reply! I actually did go with an LLC. God bless🙏
Thanks for the good video and explanation. I am planning to start a mgmt. consulting business, if I want a name for the business does it have to be an LLC or can I still have a name and be a sole proprietorship? Thanks in advance.
Yes you can just have a name and be a sole prop. You probably would then need a DBA unless the name includes your own name
Thanks
Thank you Elizabeth this was so helpful specially as a start up.
You are so welcome!
The absolute BEST video that I've seen on this subject!!! Helped me make my decision on which one to go with. Thank you!
Your voice sounds like a song - I enjoy your English! Thanks so much. :)
Welcome!
Thank you Elizabeth for sharing this video.
You are so welcome!
When filing do I file as and individual for a sole proprietorship when filing for a fictitious business name
If you are a sole proprietorship (a one-person owner business and you don't have a corporation/LLC) then yes you file for the fictitious business name with you personally/individually as the owner of the DBA/name.
@@ElizabethPW do you have to file paperwork for the dba if you are not using your name. I see where some people have and some people have not. I dont want to get taxed heavily and Im not making any money.
@@tishshamiller Here's a video I did about DBAs: th-cam.com/video/oMQnWALyRgY/w-d-xo.html
❤
Can I get a business license and still be a sole proprietor? Also what if I have a friend that wants to help me with the business?
Yes a sole prorietorship can have a business license. If you add a friend as co-owner, then you have a general partnership.
@@ElizabethPW thank you so much
My question is I already have an Llc for a boutique but I have a financial literacy business as well would you suggest getting another Llc and ein for that business or can I operate that side under my boutique Llc
You can operate as a side gig. The main issue is that each business is liable for the other. So you just need to be okay with that, and make sure to have insurance that covers the risks etc.
@@ElizabethPW thank you so much
Thanks for the information, very well explained
Glad it was helpful!
This is such great knowledge. Thank you for sharing.
Glad it was helpful!
Muchas gracias. Well explained. Glory to *Christ Jesus.*
Hi quick question I see you do respond even though thos is a older video hope you respond but just my luck you won't respond to mine lol..let's try my luck. Ok so I have a hobby of making products and I want to sell online..at pop ups and to friends and family..my products are safe and organic and cruelty free I believe I should be ok with being a sole proprietor what do you think? I'm just starting and I wanna keep it simple and cheap to start. I don't wanna invest alot of money into a llc and I get bored and decide I don't feel like found it anymore. So sole proprietorship would that be best in your opinion?
If your top priority is saving money, yes be a sole prop but get product liability insurance. Here's one resource: www.nextinsurance.com/product-liability-insurance/
@@ElizabethPW thank u
Thanks
This is just awesome info and great help for newbies like who are thinking of starting a business. What would you recommend an online guitar case - manufacturing and selling business? Thank you so much for these videos and for any tip/suggestions. Thank you again!
Glad it was helpful! Hm if you are manufacturing products, I assume that you will have inventory and contracts with the factories etc. That may be a good case for an LLC, because there's potential liability if something goes wrong with those agreements, if there's unsold inventory, if inventory gets lost or damaged in shipping, delays in shipping and customers want refunds, etc.
@@ElizabethPW Thank you again Elizabeth. I mistakenly wrote 'manufacturing', I will actually have the cases manufactured in India and then shipped to USA for online selling? Do you think I can start with sole proprietor or LLC will be a good idea since it involves international dealings? Thank so much I am totally lost on this hah..
Yes it may be better to have the LLC because of those dealings, shipping, inventory, etc
Love your videos. Super informative and thorough but short!
Glad you like them!
what about a small photography studio ??
Really depends on the specific situation
could you plese give your contact or advice ?@@ElizabethPW
Direct and very helpful. Thank You!
GOD bless! If i get an EIN and Sole Proprietor with a DBA filled, does that mean I’m still responsible with all my assets in any case?
Yes!!
Thank you for this content! I'm starting my own bookkeeping business from home. It will be just me........LLC?
It really depends on your tolerance for risk. Starting as a solo will be less expensive / hassle but the LLC offers you personal asset protection from the business
I started y business in September 2022, i have no employees and I am not making money yet. I do pop-up events and I do carry a BOP. I was thinking of doing an LLC but when I heard there is $800 annual fee in California that I can't afford. Does this fee vary in California and is forming a corporation an option (not sure what fees are involved)
The $800/year annual franchise fee (minimum tax) is for both LLCs and Corporations. There is currently a rule that the first *calendar* year it is waived. Assuming you have adequate insurance and have people sign contracts / waivers, it may make sense to just stay as a sole prop until you are making money and can afford the LLC or Corporation setup and fees.
Thank you for the informative videos, they are very helpful. I have a question, I have started going to thrift stores and garage sales and reselling on eBay as a side gig. I have recently seen videos about big companies suing resellers with some kind of trademark angle even though it’s a legally purchased item. Any way with that in mind do you think it would be wise to get an llc for the protection and peace of mind? Does an llc even protect against anything like that? I wouldn’t want my reselling hobby to impact my family if a company decided do something like that however unlikely it may be.
Hm well yes running the business as an LLC would shield you from personal liability (assuming you observe all the corporate formalities).
Hello Elizabeth
I am trying open transport wheelchair transport and I confuse where do start I have already ein number
But I confuse llc and so forth
Sounds like you got an EIN (tax id number) as a sole proprietor. You can totally do your business like that. Or, you can form the legal entity LLC (which would get its own EIN / tax id number) to have more liability protection.
I am a truck driver and i am getting pay by 1099, company provide me the truck, fuel, insurance, i only have to pay is for my food. I was planning to open a LLC, but this lady told me to open an INC , S-Corp,. That is better for taxes purposes. Now that ive been watching ur video and others video, i realized that i can do a Sole-Propiertoship or LLC.. what u recommend me?
Thanks in advance
You could open an LLC taxed as an S-Corp. In many ways it is the best of both worlds (LLCs are a bit more simple, but you get the tax benefits of an S-Corp). You want someone who has your exact financials in front of them to tell you whether the tax savings makes sense in your particular situation.
Elizabeth, Great Information! I want to do online business and continue as sole proprietor until I figure out the Business works or not. Bought the items needed for Business through personal account.What forms I need to fill out in this case and can I deduct my expenses here? If so, they need to be itemized in 1040 schedule c. Thanks for your help on this?
If you are starting as a sole prop then yes you will put them on your 1040 schedule C and they will be deducted against the business income. You'd want to keep a good record of your expenses in a bookkeeping system or at least a spreadsheet or notebook.
Hi Elizabeth! Thanks for te awesome video. I am a hobby woodworker with a full time job. I have recently started building small pieces and will start selling them at various markets. I have a home, a nice savings, and multiple vehicles. Do you think llc would be best in my situation?
Hm yes if you have some assets it may make sense to have an LLC. Also get insurance too
Hi.. I am a Licensed massage therapist. I am about to start my own Body contouring business. It's non invasive,..... what is the best way for me to go.. Sole or LLC? Thanks
Check with the rules of your state -- in some states if you have a professional license you have to either be a sole proprietor or have a special business entity ("professional corporation" or "professional LLC"). Those rules are where you need to start.
Hi Elizabeth. Great video and information. I am going to set up a DBA and I will be getting errors and omissions insurance. This is for my notary and insurance business. I am the only employee thus far. Do you recommend DBA with E&O Insurance or does LLC sound safer?
Hm right for a notary business, you get E&O insurance for the biggest risks (mistake in the notarization). Also consider regular business liability insurance, to cover other stuff like a customer slipping-and-falling. LLC does add a bit of protection too, and that's more about your comfort level vs the expense of a CA LLC (including the $800/year franchise fee tax).
I currently have a sole proprietorship under my personal name, but I want to create a LLC with a official buisness name. I have a EIN. I also have established several vendor accounts. Would I have to get a new EIN, and start over building vendor accounts?
Yes the LLC will be a different legal entity, so it will need its own EIN. As far as vendors, it really depends upon them -- they might let you transfer it to the new entity.
Thank you so much for your videos, it was very helpful ! I am on my way to starting a Recruiting Agency, where I connect employees and employers for long term placement or short term placement. I Will be doing it from home and I might get a partner as the business will grow along the way. In his situation would I need any insurance ? Since I don’t have any employees? And between Sole proprietorship and LLC what would be the best for my type of business?
I recommend always getting general business insurance, probably something called "business owner's" policy that has a bunch of stuff included. Since you are just starting out, you probably don't need much tax planning yet, so you'd look at the risk/liability issues for whether you want to protect your personal assets from the business' liabilities. Also think about whether your potential clients would be more comfortable hiring an LLC vs a sole proprietorship (many larger companies want to only hire an LLC or corporation).
Hi Elizabeth, I run an Airbnb from the second story apartment of my own home. Trying to figure out if it makes sense for me to form an LLC to protect my biggest asset. Some people say that the protection I get from Airbnb and my own personal short term rental insurance is enough but others have said I should form an LLC. Would love to get your opinion.
Hm I'd think about how the LLC could protect your real estate from the business -- you might also be able to do some interesting tax planning too
Hi Elizabeth! Thank you for this video, so straightforward and helpful. I am looking into creating my own Nanny Referral Agency in near future. I’m 21 years old, and always dreamt of having something of my own. I plan on serving people locally. Do you suggest an LLC or Sole Proprietorship? Thanks!
You're welcome! Hm a nanny referral agency may be.a good example of a business where it makes sense to start out as an LLC, because you have increased liability. If you refer someone who does something wonky, you don't want the parents to come back and hold you personally liable. Obviously you also want contracts/releases and insurance to protect you, but since parents (especially wealthy ones) can be over-the-top, protecting yourself as much as possible is a good strategy.
@@ElizabethPW yes thank you for confirming that. I guess I’m more hesitant of the amount of documents because I’m new to this, but I know that’s apart of the process!
Thanks for the valuable information! I’m sure I want to have an LLC for my new business, should I have a single-member LLC? Or should I include at least one more person to get some benefits?
The big issue is honoring corporate formalities (separate bank account, paperwork, don’t commingle or use biz money for personal stuff). That’s why some single member LLCs have trouble - they don’t keep it proper & formal.
@@ElizabethPW Thanks a lot!
@@ElizabethPW Do you mind explaining what you mean by keeping it formal and proper. Also, how can i tax the llc as a sole prior?
@@tishshamiller I just recorded a video about the common mistakes LLC owners make, including the formal paperwork issue - it will be coming in a week or two
This video is super helpful! I am wondering if I should be a sole proprietor or LLC for my business. I am a contractor who does UX/UI design work (seems pretty low risk). The income is decent this year but may not be as high next year if I find a full time job. I do have personal assets which I would like to protect. Should I go the LLC route even though I may not have much income next year and my work is pretty low risk for debt or lawsuits? If I start as a sole proprietor with a dba name, can I use the same dba name for my LLC if I want to change structure later? Or do I have to use a different name for my LLC because it's been registered with my state business license as that name?
I'll answer the easy question first -- as long as the name is available, you can use the same name for the LLC as your current DBA. Hm it really is a personal comfort level for whether you need the LLC - I do agree that UX/UI is fairly low, except for intellectual property disputes about design or code. If you go the sole prop route to save money and make it simple, make sure you get business liability insurance and have a written contract with every client.
As a NEW NOTARY PUBLIC what is your advice. SOLE PROPRIETORSHIP OR LLC?
For a notary public or any other licensed professional, you'll want to get errors and omissions / malpractice insurance to cover you for liability from your work. Otherwise, getting an LLC depends upon whether you want extra liability protection (depends upon your tolerance for risk) and if you need the tax planning.
Hello!!! What is the resource for information on converting from a sole proprietor to an LLC. I would like to keep the same business name.
here's a vid on that: th-cam.com/video/iI7wyWBB8yY/w-d-xo.html
Hi for a Carpet Cleaning business, Sole Proprietorship or LLC. I would be the only owner and would be the only person working the business for now. Thanks.
When someone is starting a one-person business (they are the only owner and only worker), it is common to start it as a sole proprietorship to save money and complexity. The only issue is that there isn't liability protection from anything that happens -- ways to deal with that risk is to have good contracts with clients/customers and to have business insurance.
My question is I want to start a contracting business and buying houses, fixing them up and selling more like home renovations. What would be the best for me starting off
It depends on how you will be financing. It would be great to have an LLC and use that, but it may be hard for a brand-new LLC to get the financing since it does not have a credit rating yet
Confirming your saying I don't need a licenses or business permits with a Sole Proprietor?
All I found was this which kind of halfway answers the question but not fully:
A general business license is not required in Texas. However, it is important to determine necessary licenses, permits, certifications, registrations or authorizations for a specific business activity, at the federal, state and local level.
Whether or not you need a business license or permit has nothing to do whether the business is a sole prop or an LLC/corporation. In Texas, there isn't a general business license, but many industries / types of business need a permit or license. Here's a guide for that: gov.texas.gov/uploads/files/business/2020TexasLicensesPermits.pdf
Thank you, so can a Digital products business and a physical product business be registered under one LLC?
Yep! You can do that
Elizabeth, thanks so much for this video, more helpful than anything else I've found online. Two questions if I may; I am starting a sales organization that will require me to hire independent contractors, no direct employees and no real risk, do I really need an LLC? AND, I will have a second DBA and would like to open two distinct bank accounts and I understand I can do that with one EIN as long as they are both sole props? Thanks so much for your channel, you are providing a great service!
For that type of business, you'd want to make sure to have well-written contracts so the contractors are indy contractors *for sure* and also require them to have insurance, business license (if they need that) etc. in the contract. Yes you can have multiple bank accounts for each DBA (with one EIN). Well unless that bank has some weird rule but that would not make sense.
Hi thanks for the video, very helpful! What do you suggest for a small business for Tie Dye DIY Kit that planning to start in few months? LLC or sole proprietorship? Live in LA County, Cali. Would you suggest to form LLC from Jan 1st 2022 as it's almost Q4? Than you.
If you are not going to get your business up--and-running until 1/1/2022 then yes it can be good to register it so it is effective as of 1/1/2022, so you can use 2022 as your "first year" (and get the $800 franchise fee tax waiver for that year). For a product business, it depends upon whether you are making them yourself or if you are ordering/manufacturing a lot of inventory -- when someone has lots of inventory, having an LLC can protect you in case you are not able to sell the inventory.
Hi, I opened a flower shop and I wasn’t sure about sole or LLC so I applied for sole now listening to this I cancel my EIN and apply all over again for a LLC? did I do the correct thing?
You wouldn't need to cancel the EIN (you can keep it in case you want to use it later for something else). For a business that is going to have a physical location and employees, I usually recommend an LLC since there's a fair number of liability issues. You can get insurance for many of them of course, but there are some things that are not possible to insure against.
Hello. A blogger here. In regards to the GDPR and CCPA privacy laws and possible liability that could come with them what is your take on LLC vs. Sole Proprietor for someone just starting out with a blog? Thank you for your time.
Really I'd focus on having a Privacy Policy that complies with GDPR/CCPA first (since you'd need that as a sole prop or an LLC). But yes, having an LLC helps to protect you personally, if you mess up compliance. Note: CCPA would rarely apply to a new blogger (it applies to biz that make over $25M, sell/buy 50K info, or get 50% revenue from selling info). Compliance tends to only be a big issue for bloggers who buy or sell lists.
Hello, Thank you so much for the video! I have an 8-5pm job as a graphic designer in Tx and I'm also a freelance graphic designer, videographer and photographer. I plan to invest more time in my side hustles ( which don't make much income yet). I'm wondering which could be more beneficial for Taxes wise now. I want to set up a single-member LLC for legal matters but it might be more headache to set it up compared to Sole Proprietorship. Any advice in this case? Thanks for your helping hands.
For taxes, typically there isn't a big savings by being an LLC vs a sole prop until you are making enough money where being taxed as an S Corp makes sense (usually high five figures of profit, since the S Corp tax status also comes with more admin and costs).
Really appreciate this information. If I had a stock trading business, no employees or clients, just earning income trading for myself, would l always need to be a sole proprietor or would an LLC be necessary based on how much income is made? Also, would liability insurance NOT be needed with this type of business? I can’t think of what type of liability this type of business would create since there would be no clients or employees but thought I would ask. Thank you!
You may want an LLC or Corporation, to take advantage of S Corp tax savings (if you are making enough money). One aspect of liability insurance is that if your homeowners/renters insurance company learns you have a business with no insurance, they may cancel your policy. That's a good reason to get business insurance, if nothing else.
How to use a holding LLC to reduce taxes of a subsidiary? Could you publish a video on that topic?
I'm not the best person for tax strategy -- look for a CPA or tax advisor
Im applying for a business license and im stuck. It gives me options. Help please??? example :
welding
Welding-exempt
Welding - reduced
Some of those forms and definitions are confusing. You may find those definitions in the Ordinances (like laws or regulations) for the city/county where you are applying for the license. Otherwise I'd suggest emailing or calling their office.
Hi what do you suggest for a small concrete contractor sole proprietor, Im not sure to be LLC -S corp my prediction is to be making about 60k this year. And I do have assets. Whats your best recommendation?
A construction business is a good example where having an LLC/S-Corp is helpful to protect your personal assets from liability, especially if you have employees/workers. Obviously you also want to have insurance, but there are so many potential legal problems from that type of industry, due to the physicalness of the job.
I want to start an HVAC business. But don't want to lose my assets. Which way should I go ? I'm thinking about LLC. But is it S or C or just LLC ?
You can start with an LLC, and then if you need to have a different tax status later, you can have it be an "LLC taxed as an S Corp" or "LLC taxed as a C Corp"
Question: CD Baby is a service that helps distribute your music to Spotify iTunes, etc. they currently want their artist to select “a business type” I’m an independent artist. Should I be a Sole Proprietorship since it’s strictly just me? Or should I be an LLC?
Most independent artists start out as a sole prop, and then only incorporate when it is a tax savings. The main big risk aspect is if someone is sampling or otherwise doing something else that could have copyright disputes -- then it can make sense to form an LLC earlier rather than later.
Hi Elizabeth I’m currently a sole proprietor since 2019 I’m so confused and don’t know which route to go with between C Corp or S Corp what do you recommend
For most small businesses, an S Corp is preferable to avoid double taxation. Not all, though - you’d want to a tax person or CPA about it.
Thank you so much 🙏🙏, I am planning to start a small clothing bussiness and am very much confused about the permits I need . This video is very helpful.
great to hear!
Thank you!!! I'm so happy, I seen this video before apply for my LLC. I buy hair from vendors overseas and using the product to make my own custom wig. I am using my own ordinary everyday income to make this investment. I am trying to get my self to a passive income to pay for those investments. In your opinion, starting out do you think a sole proprietor or LLC will be the better fit for me ??? Some of my customers who purchase my wigs, get an install. Im just not sure if my business is a high risk factor where i'll need liability from the LLC, at the moment.
It's a great question! Hm I'd look at how much money you are investing in this business, including how much credit the business will have. For example, some businesses have to order a lot of materials on credit, so if the products don't sell, they still owe for those materials. Some of the risk with the customers can be handled with insurance (like liability insurance if someone slips-and-falls at an appointment).
I own a party rental business and right now my kids and myself are the only workers. Is it necessary to go for an LLC or remain solely? I would also like to start business credit?
Hm if you want to have the business build credit, then it needs to be its own legal entity - so either an LLC or corporation. Otherwise, if it is a sole prop then it is really just your credit.
Hi, what do you suggest for a company that imports raw herbs in US for sales locally in US.
When selling products to be consumed like raw herbs, it can make sense to be an LLC to help with any liability from the customers consuming the products.
Hi Elizabeth.I watched your videos about LLC but got a question in my mind that in case of PARTHNERSHIP LLC where should be mentioned the names of the partners?
If you form an LLC, the owners of the LLC are typically named in an annual filing with the state, usually called an annual report. In California it is called a Statement of Information and is required for LLCs every other year.