Questions About Sole Proprietorship and doing business without an LLC

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keliix06 said:
It doesn't matter if you form any entity at all, you're responsible for quarterlies if you make over x amount, and if you're not paying enough there will be fees a-plenty.
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Correct: I've had to pay quarterly estimated taxes for a while now, including back when I was just a sole proprietor with no business form other than a DBA
 
I just got done meeting with my new accountant and many of the reasons for having an s-corp over an LLC are going to disappear next year. The big issue is the amount of money you claim as an employee vs a profit distribution. Distributions are taxed less, so you always try to take as much money out of the company that way. However the IRS says that you need to make a reasonable salary.

Any future companies of mine will be LLC. I am actually thinking I may dissolve one and restart as a LLC. You just need to watch out for any tax implications of this.

The best advice is to find a good corporate tax attorney and talk to them about it. They are well worth their money.
 
johu said:
Correct: I've had to pay quarterly estimated taxes for a while now, including back when I was just a sole proprietor with no business form other than a DBA
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I beleive the rule is if you expecting to owe more then $1,000 in taxes for the year, then you have to pay estimated quaterly taxes.

Also, depending on which state you live in, you may also have to pay estimated taxes to your state too in addition to federal taxes.
 
johu said:
I've had my PayPal account since I was 13, and I was processing well over $100k (in and out of the account, including a PayPal debit card) per year with it before I was 18. The days of 1.5% cash back with no limit on that debit card was awesome. The debit account was flagged often for high activity, but I was never asked for proof of age or anything.

And to the OP, no you don't need any organized business form to receive payments. Just mark "sole proprietor" on the W9.
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I got my Debit Card since '06 and they didn't ask about my age. Just recently, i lost my card then i request the new one. Don't know the hell is up with them all the sudden declined my request. They stated that i have to be over 18(which i've been having one for years). Prolly i got too many transactions over short period of time and they call home almost every month. Kinda sucks, my dad got me a CC with daily limits. :-P

Anyway, i'll fire some questions while i still can. These may be helpfull for OP as well.

-When should i incoporate?for ex, when i make $XX,XXX/month?
-Who should i consult with? local accountant?
-In terms of EIN, do i have to get it(EIN) first or incorporate first then apply for EIN?
-Do i have to have physical address? Can i use P.O box instead?

Thanks OP for letting me jacking the thread...
 
Bottom line: Talk to a pro cpa, I am in no way a pro at that shit. Thats why I pay someone, that was just what I remembered from a course I took. Research it.

And don't listen to this:

It doesn't matter if you form any entity at all, you're responsible for quarterlies if you make over x amount, and if you're not paying enough there will be fees a-plenty.

This is also untrue:
If you make over $600 from any single entity they are required to file a W2. Your first, I believe the number is $11k, is actually tax free, federally and at least in MN. Then it's a sliding scale up from there.

My CPA passed the CPA test as one of the top 5 in the entire country and costs under $200/year. The best money you will ever spend.
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redmonkey said:
-When should i incoporate?for ex, when i make $XX,XXX/month?
-Who should i consult with? local accountant?
-In terms of EIN, do i have to get it(EIN) first or incorporate first then apply for EIN?
-Do i have to have physical address? Can i use P.O box instead?
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1. It all depends on your situation. When I filed my LLC I think I was making under $10k/year. I just wanted the liability protection. For how little it costs in most places just do it. It's a tax write-off :)

2. Always talk to an accountant or tax lawyer. They will listen to your exact situation and let you know what's best for you.

3. Either. The IRS has an automated 800 number you can call and you get it instantly. You don't need to have formed any type of entity to get one, but if you are planning to form an entity do that first.

4. You can find this on the SoS site for your state. I believe in MN you can use a PO Box, but this likely will vary by state.
 
omgyams said:
Get a goddamn CPA already.
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The best advice in this entire thread.

The primary reason for incorporating today is liability protection. There are no loopholes that allow more deductions from one entity to another.

As a sole proprietor you pay self-employment tax at a rate of 15.3% of your net income in excess of $400.
 
If you are just an individual or LLC, just go to the IRS web site and print out a 1040, Schedule C, Schedule SE and fill them in with a pencil. You can get a really good idea where you stand. Also the 1.5 inch thick instruction book is on the web site also.
(of course this does not include state taxes)

This is what I did and feel like I have a pretty good idea where I stand, although I'm meeting with a tax person this week to flesh out some details.

My last biggest concern is health insurance. I need to find out the details, but it looks like if I get a health savings account and a high deductible insurance policy and dump some money in the HSA, I can deduct both on the 1040.. not sure about the details though.

The final estimated tax deadline is somewhere around Jan 15. Don't miss that.
 
South St Paul, MN. Family friend, she bought the business from my Grandpa. But I'm fairly certain I'm not getting a discount. I have a pretty straight-forward setup though. Income is only from 2 sources and deductions are easy.
 
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