Entity Type

The decision whether to be a sole proproprietor, single-member LLC/PLLC or even whether to incorporate can be a difficult one. Many issues are involved, including tax and legal. The type of entity may also have an impact on such things as the type of health insurance you are able to qualify for (depending on your state). I would suggest you consult a professional who is familiar with taxes and laws in your state.

I was just polling the forum members out of curiosity. I am a CPA and familar with many of the legal and tax aspects of the two entity types.
Maybe my questions was not properly worded.
Thanks for all the responses.
MM

For your new entity and, depending on your income and your age, you should consider a S-corp. Unless your income would initially be substantial (ie by acquisitions) such as over $120K, this should save you about 15% of income. Ie. Take a payroll for one-half of your income and pay all payroll taxes. The other half would be reported to you on a K1 one form thereby saving the FICA/MEDICARE (self employment) tax of 15%. The age part however, is important in that the one-half reduction will not be going toward your social security income. If you have already built up substantial credits from prior employment, this approach may not be detrimental. Also, as the practic grows, you could of course, contribute more to the system if you choose. As to LLCs/LLPs, it appears that attorneys are quick to suggest them but fail to comprehend the SS/MEDICARE saveings.

Consider the cost. Some states like NYS have an LLC fee, due the end of Jan each year. There is a rate /member with a payment of a minimum number of members. Thus it's quite expensive for a single member llc.

I don't know where you are located.

I was thinking of starting my business as a sole proprietor but having liablity insurance.

Having liability (errors & ommissions) insurance is a good idea, but you might consider forming an LLC. It will provide more liability protection. Plus, I think it adds a little more credibility to your business to have LLC after the name. It usually costs less than $200 to register with your state (go to the secretary of state website). There are sample forms available (and books at the library). If you will be the only member, you could fill out the forms and file them yourself. But, I'm not an attorney, so you may need to seek legal advice.

Michelle L. Long, CPA, MBA
Author of: Successful QuickBooks Consulting: The Complete Guide to
Starting and Growing a QuickBooks Consulting Business (SuccessfulQuickBooksConsulting.com)

Thanks for the suggestion about the LLC. I looked at my states site and it looks like nothing more than $125. All i have to do is file 2 easy papers and send in the money. WOuld you suggest being your own Registered Agent

Yes you should be able to be your own registered agent. (unless you're incorporating in a different state). They need a registered agent to receive mail and/or be served papers in the event you're ever sued. Again, I'm not an attorney--this isn't legal advice and it may be different in your state. (my disclaimer ;-)

IANAL, but generally I think an individual is responsible for their own self motivated actions, no matter what the legal form of the business. Unless of course the form of business is a governmental unit and then soverign immunity may apply. Insurance may be the best risk management strategy, _AFTER_ doing the best you can to begin with, turning down work you aren't comfortable with, and saying you're sorry and doing your best to ameliorate any accidents that happen.

As Al Capone knew, the best protection from being held accountable when things don't go as planned is to get others to do your work for you and give them as little direction as possible - ideally none.

I hope this helps,

Scott

NACPB has an excellent article, BOOKKEEPING FOR VARIOUS BUSINESS ENTITIES, which addresses the pros and cons of various entities at http://www.nationalba.org/book... (Technically it's on their sister association's website, National Bookkeepers Association).

Melissa Smith, CPB
Certified Public Bookkeeper
Member: NACPB

Or, go to www.mycorporation.com and you can find lots of helpful info & file the forms too.

Michelle L. Long, CPA, MBA
Author of: Successful QuickBooks Consulting: The Complete Guide to
Starting and Growing a QuickBooks Consulting Business
(SuccessfulQuickBooksConsulting.com)

LLC and Corporations in California have a minimum income tax of $800 per year - even if you have a loss. I resent having to pay that for the privilege of having a business. That is something to take in consideration during the first year. I would much rather organize as an LLC or corp. but wanted to see how much business I was going to do. I do have E & O coverage.