LLC or not?

[homemade]

I'm thinking about getting into a part time tree cutting and fire wood selling business. There are two problems. 1) Everyone and his brother either has a chainsaw or know's somebody that does there wood for them. 2) Insurance. I've been able to secure some trim and removal jobs for cash from the public with a strick no libility option.
I've already dicussed with my personal insurance agent and practicly told me to "Get Real" when I told him I need insurance to keep from getting sued.... Am I better off getting a LLC with a lawyer or a new insurance agent.

 

[lxt]

not sure of your biz size? how many employees do you have? an LLC designation is basically limiting your liability it somewhat seperates you "personally" from you the "Biz"

At first & being part time I would obtain the proper insurances!! liability, WC & any umbrella coverages that will pick up on whats not covered. as far as being liable on a personal level.....I would incorporate within my contracts that which eliminates me from such & make sure to have the customer sign off on it.

Just do a good job & if any complaints come to you....take care of em...............you will always find that one customer that will find a way to screw you over & no matter how you have your Biz designated: sole Prop, INC. LLC, etc... you will learn the loss always falls on you................just learn from it & move on!!


good luck!


LXT..............

 

[RAG66]

Until you have considerable assets I would avoid going to incorperation. It is not an insult to be a sole proprietorship. The amount of protection from insurance is up to you. I reccomend the smallest policy cost wise/ level of coverage/ deductible. You are the "original small guy". Some may advise you to go bigger but you probably do not need to yet. I have run 6 years now full time with a 1 million/ commercial lines policy, surety bond, Labor & industries insurance Etc. The paper work is sometimes complicated. Stay simple at first.

 

[ATH]

.... Am I better off getting a LLC with a lawyer or a new insurance agent.

Sounds like me you are asking a question along the lines of "should I eat breakfast or put on my pants before I go to work?". (2 entirely different questions...both answered "yes")

Yes, you should get insurance. Without the vehicle and without pesticide endorsement I pay less than $500 per year.

I paid about $100 to file an LLC with the State - no lawyer, legal zoom, etc needed here in Ohio. In the eyes of the IRS you are still a sole proprietor, but for a one time $100 fee why would you not protect your assets with an LLC? Do that first so it is the company (not you) buying the insurance.

 

[homemade]

I guess i should have been more clear about why i felt the need for it. I dont have any employee's, I'm a one man operation. And if I do have my good buddy help me haul brush or w/e he's in the same position as I am, as far as having a few jobs and should have some protection but don't. The two things I'm most concerned about its causing extensive property damage. For example droping a tree on a house and doing more damage then can afford... The second reason i get worried is I just diced my leg open with my chainsaw and had to clame on my personal health insurance. I wouldnt' expect the home owner to cover it on there homeowner's insurance. Gotta take responsibily for my actions and just dont want to get screwed over. A job that went bad because of an unhappy homeowner because of ruts in the lawn or w/e i can handle. But its there living room i dont have the time to rebuild.

 

[lxt]

WOW..........cutting yourself?????? no chaps? the worries you have are somewhat scary to those of us who are pro`s!!

seems like your trying to protect yourself in advance cause you know that you are gonna FUBAR something!!

Most have insurance (here) cause its considered being a pro & our use of it is ZERO, its a requirement, proof of a legitimate biz......with the hope of not having to use it!!!!!!! you come of sounding like someone is (will) upon hiring you need major home repairs!!!!

Most here would suggest working for someone FIRST before going out green, on your own & destroying property or killing yourself!!



LXT......................

 

[ATH]

Not to sound rude...but you seem to be lumping a few entirely different things together here. One insurance does not do all. You have made reference to the following three:

*Liability insurance covers damages you do to others or their property

*Worker's Compensation (likely required by your State if you have any employees) covers injury to employees. May or may not be required for a sole proprietor. If your health insurance won't cover an injury sustained while you are working for yourself you should pay workers comp on yourself.

*Health insurance covers injury to yourself. MAYBE...some health insurances will not cover an on-the-job injury even if you are a sole proprietor. Check with your health insurance company.

It is fairly unlikely that you will get all of these coverages through one agent. For example, in Ohio we must purchase Worker's comp through the State fund. Most other states you can buy it on the private market.

 

[Ghillie]

http://www.wisconsinsbdc.org/sbdc.htm

Take a look at the link and find your local SBDC. They will have a wealth of information to assist you.

If you register as an LLC and do not isolate yourself financially from the business financing (seperate banking, credit cards) you are still making it easy for a lawyer to go after you.

And the Small Business Development Center will be able to clear up a few other misconceptions that I think have not come to light yet.

The counseling that I have gone to here in Ohio is free to the business owner.... and WELL worth it.

 

[rtsims]

I say go for it

In my oppinion there are more advantages to forming an LLC than disadvantages. If you plan on slowly building this "company" up and doing it full time then by all means form an LLC. Another note, if you plan on getting licensed with your state you have to form a business. You also have to have a business to get insurance and a bond.
Costs: (in Oregon anyway)
Forming the LLC: about $150
Licensing: $325 every 2 yrs
LLC renewal: $100 per yr
Insurance: $525 per yr (depending on your coverage)
Bond: $200 per yr (depending on your coverage)

Realise these are also write offs. Write offs are a whole nother can o beans to go in to.

 

[lxt]

Before you "go for it" I would say consult an Attorney!! why?

first off anyone who goes to "legal zoom" & thinks that they just formed a legitimate LLC needs their head examined!!

Believe me there is more to it than renewal fees, license fees, etc... pay the $100 bucks, consult with an attorney, take a note pad & write down what he says.........there are alot of little things you will need to do that will nickel & dime you!!

Of course this will all depend on the state you live in!! just the paper work seperating you personally from the biz will cost, ficticious name filing, EIN# registration, stamp & seal for biz filings (how many forget this???) so, just get in person legal advice & then make a decision!!!!


LXT..............

 

[rtsims]

I agree with lxt as far as the nickle and dime thing goes. There are alot of little fees that i did not mention. As far as the Legal Zoom thing goes, from everything i have heard they cut alot of corners. I cant tell you as i have never used one of those sights.
Consulting a Lawyer. Never a bad idea. Depending on your situation i dont think it is always necessary. You can get alot of info from your states small business center. Pick ther brains as ghillie said above. If this is going to be your business, take the time to research everything thoroughly, know the ins and outs of every aspect of your business.

 

[surfspc]

Llc

Yes the LLC will definitely cover you if you were ever to get sued. It is not worth the chance. LLC's require a bit more money on taxes but it is overall the best option for you. Sole proprietorship is a thing from the past

 

[ATH]

How does an LLC cost you more in taxes? (Maybe your State is taxing an individual differently than an LLC differently...California does a lot of things different than the rest of the country, so I would not be surprised if they punished small businesses more severely). However, the IRS does not recognize an LLC as a taxable entity. In the eyes of the IRS, an LLC is either a sole proprietor, partnership, or corporation. LLCs can be any single or combination of those depending on how the LLC is organized and State laws.

 

[indiansprings]

My firewood business is set up as an LLC, I operate the company out of a seperate bank and account from anything personal. I think it also pays off with me paying less taxes. I use a good CPA, and I keep excellent records, I document every check that I receive, I also write off every thing possible, have the truck and trailer, saws and other major equip set up on depreciation, deduct mileage, anything you can thing off that is remotely related to the business, with receipts were it was paid for. I even write off meals on the days where I provide it for everyone. I might forget a cash transaction or two along the way, I'm get old and forgetful. I worked to hard for what I've got, I carry insurance, people are just to litigation happy these days. I've heard of guys delivery having trucks fall thru septic tanks or damaging lawns, worse yet having a stick of wood fall off and causing a wreck or damaging another person's vehicle, or throwing a stick to another worker and have it knock his teeth out, lot of things can happen in the wood business outside of the woods.

 

[ATH]

My firewood business is set up as an LLC, I operate the company out of a seperate bank and account from anything personal. I think it also pays off with me paying less taxes. I use a good CPA, and I keep excellent records, I document....

We'll try this from the other side too: How does having an LLC lower your taxes? (rhetorical question...it does not). Neither does having a separate bank account.

Keeping good records and having a good CPA does! You could have it all in one account, and not be an LLC and your tax burden to the IRS would be the same. You could still write off the same things, depreciate equipment, etc... it is just MUCH easier to keep track of all of that if it is separate from your personal accounts. However, the IRS still sees you as a sole proprietor and you are still taxed as such (well, unless you are a partner or your LLC is owned by a corporation...).

I don't say that to minimize the significance of anything else as you mentioned several VERY helpful things for a new business owner to be aware of...just to once again highlight that LLC has no bearing (possitive or negative) on your federal taxes.

 

[lmbrman]

As some have mentioned, proper bookkeeping/filing etc are necessary to validate the LLC- I know of a guy that got audited and had some problems cause his name was on the loan for a chipper when is hould have been the LLC. Each state has different ideas of how limited the liabilty actually is- pretty easy in WI to go after the shareholder of an LLC if there only is one or two, makes little difference from what I have seen.

Attorneys know how to get around the LLC if they want to.

good luck with your endevors and be safe