Becoming an LLC

[Matt C]

HI Kieth, As I am starting out in this new business I thought all I needed to do was get a mower and a few accounts and I'd be on my way. So now I am registered with the town with a trade name but it was suggested to me that I should become an LLC. to protect my home. What are your thoughts on this and if so how do I go about it? Thanks Matt

[hounddog]

Lawn care business tips

Originally Posted by Matt C HI Kieth, As I am starting out in this new business I thought all I needed to do was get a mower and a few accounts and I'd be on my way. So now I am registered with the town with a trade name but it was suggested to me that I should become an LLC. to protect my home. What are your thoughts on this and if so how do I go about it? Thanks Matt Do it yesterday. More so if you don't have the money for insurance when you are first starting out. you can control where you point the mower you can't control the dumb @#$%#@ who walks up behind you while you are cutting with ear pugs on stands next to the shoot and gets hit by a rock. then this dumb person will sue you.

[Steve]

You should be able to get the required forms from your state website to create your llc. Or a local accountant or attorney can help you fill out the forms as well.

You might want to think about doing it at the end of the year so you don't get all messed up when filing your taxes. Otherwise you will have to file for your dba and then for your llc.

Keep us posted on how this goes.

[rob8804]

Are most landscapping business' set up as LLC? I know that there are lots of benefits to setting up this way. I was just curious if this is standard for the industry. Or are there other incorporations methods that are used like limited liability partnerships and such. thanks,

Rob

[Chachi]

I run mine under a LLC. Basically it is what will suit your needs.

[rob8804]

yeah looks like it. Most business start up as llc's now. What about an S-corp? I'm a little confused on that one. I know that's a tax election one can make.

Can we start up as an llc and then for our taxes make the s-corp election??

[Chachi]

Took this off a website for you

C-Corp, S-Corp or LLC?
C-Corporation (C-Corp)

A C-Corporation is the traditional and most common type of corporation. Forming a C-Corporation allows the company to have an unlimited number of shareholders. This is beneficial to companies which will require many investors, as well as companies who envision offering stock publicly. An inherent benefit of all Corporations and LLCs is that they shield their shareholders from personal liability arising from business debts and business lawsuits.

* Ease of Transfer

A favorable aspect of the C-Corporation is the simplicity by which its stock can be sold or otherwise transferred. Transfers of C-Corporation stock have very few limitations. Furthermore, if a company will offer stock publicly, the C-Corporation is the only option. S-Corporations and LLCs are not permitted to offer ownership through public offerings.
* Familiarity

Familiarity with the C-Corporation often drives business owners to choose the corporation over the LLC. While an LLC is a relatively new form, the C-corporation is the traditional business type with which most business owners have previously dealt with on some level. This familiarity often leads owners to make the comfortable choice, and stick with what they know.
* Low Cost

A further consideration is the state filing fee. In most states, the fee to form a corporation is slightly less than the fee to form an LLC. Use our "Quick Quote" tool to see the fees charged by your chosen state.
* Disadvantage

The primary disadvantage of the C-Corporation is that it is subject to “double taxation.” This means that the company’s profits are initially taxed at the corporate level, and then taxed again at the individual level when distributions are made to the shareholders.



S-Corporation

Since its creation, the S-Corporation has increasingly become the preferred form for many small businesses. The S-Corporation is similar in structure to that of a C-Corporation, but must meet a few further requirements. In fact, an S-Corporation is initially formed as a C-Corporation by filing the articles of incorporation with the Secretary of State. The C-Corporation can then become an S-Corporation when an extra step is taken by filing with the IRS.

* Avoid "Double Tax"

The primary benefit of an S-Corporation is that it allows the shareholders to receive profits free of taxation at the corporate level. The profits will only be taxed at the individual level, thereby avoiding the “double tax” that C-Corporation shareholders are subject to. (C-Corporations are taxed at the corporate and individual level).

However, not all C-Corporations are able to take advantage of the S-Corporation status. A corporation is only eligible for the S-Corporation election if it meets the following list of ownership requirements:
1. The company must have no more than 100 shareholders (a husband and wife qualify as one shareholder).
2. All shareholders in the company must be individuals and not other corporations or LLCs (estates, some exempt organizations and certain trusts qualify as shareholders).
3. No shareholders can be non-resident aliens.
4. There can only be one class of stock in the company (this limitation disregards differences in voting rights).
5. The company making the election cannot be a bank or thrift institution, an insurance company, or a domestic international sales corporation (DISC).
6. Each shareholder must consent to the S-Corporation tax status (as explained in column K of IRS form 2553).
7. No more than 25% of the company's gross corporate income may be derived from passive income.



Limited Liability Company (LLC) - with comparison of LLC to S-Corporation

Today, many businesses are forming as a Limited Liability Company (LLC) and are finding that an LLC offers the "best of both worlds" of corporate forms. An LLC allows for pass-through taxation (see "Tax Advantage" below), thereby avoiding the "double tax" of a C-Corporation, yet also affords its owners the personal liability protection of a corporation.

* Tax Advantage

The popularity of the LLC is primarily based on the Tax Advantage. An LLC operates in most ways as a corporation, yet the distributions to its "members" (shareholders) are not subject to taxation at the corporate level. Instead, the distributions are "passed through" the corporate level and are taxed only at the individual level. Therefore, the LLC avoids "double taxation."
* Personal Liability Protection

Corporations and LLCs are separate entities from their owners. Since the two are separate, the personal assets of the owners (such as their personal residences, and personal bank accounts) are not reachable by business creditors.
* LLC or S-Corporation?

As mentioned above, a C-Corporation that satisfies certain requirements can choose to file as an S-Corporation. The primary benefit of an S-Corporation is that it allows the shareholders to receive profits without taxation at the corporate level. Instead, the profits will only be taxed at the individual level, thereby avoiding the “double tax” that shareholders are usually subject to.
* If an S-Corporation is also not subject to the "double tax," are there situations where an LLC is still preferable?

An advantage of an LLC is that the formation and ownership requirements are less stringent. Usually, an S-Corporation can issue only one class of stock, while an LLC may offer a variety of classes. The S-Corporation also limits the number of shareholders to seventy-five or less, and prohibits non-resident aliens from possessing ownership in the company. Further, S-Corporation shareholders cannot be other corporations, LLCs, or partnerships. An LLC has no such limits to ownership.

The LLC also offers an advantage in management flexibility. The LLC can be "member-managed," meaning that it would be managed directly by the shareholders. Or the owners of the LLC can agree to have the business “manager-managed,” meaning that the management can be structured and delegated from the owners to managers.
* Why not Choose an LLC?

Although the LLC form is preferable in many ways, a C-corp or S-corp may still be the best form in many circumstances. The primary reason that a C-corp or S-corp may still be preferable is the simplicity by which the stock can be sold or otherwise transferred. A sale of an ownership interest in an LLC must meet certain requirements, while a sale of corporate stock virtually has no limitations. As mentioned above, other favorable aspects of the corporation include the public’s familiarity with the form and lower state filing fees. Finally, the “pass through” tax advantage may be less beneficial to businesses that are small enough to take advantage of the 15% and 25% tax rates.

Note that although every state allows corporations to have a single shareholder, a small minority of states require that an LLC have more than one Member. The rest of the states allow a single Member LLC.

[rob8804]

thanks for that. I did some more research and it seems that LLC is the way to go. I was just trying to see if LLC is indeed the best option for the landscaping industry.

Do you guys find that most people in the field start up as an LLC?

[Hedgemaster]

This is probably why I had never considered "working for myself" before. Every time I read this stuff, my eyes start to bleed.

Shareholders? Stock? What the heck, it's just going to be ME. No employees, just me... I have no idea what any of this means for me.

I'm not "official" yet, and seems I still have much to learn before doing so.


Time to stop Googling equipment sources and start learning more about "the business". Sigh. Not enough time in a day.
Any pointers/links to info here on this forum that may be useful to a noob are welcome, and appreciated.

[LawnMoore]

I went Inc. because it was recommended over LLC by more than 1 business owner i know, both who have had both organizations, the first is in an LLC now and had a Corp b4, he recomended i should go Inc, as he said his old Inc was easier, and the second has a Incorporation now over his old LLC, he said he went incorporated to get some added tax breaks over LLC, and im not sure how this works but he said with his Inc now, he has sold the majority of his stock to a "female client" which inturn gave him some sort of advantage as his company is now clasified as a "minority owned business" this advantage, i am not well aware of at the time. but i can find out sooner or later.

I started Lawn Moore Inc. about a week ago, it was simple, i signed up on floridas gov site, 1 easy form and 80ish dollars.. 3 days later i recieved my confirmation, the next day i had my EIN # from the IRS instantly! 1 form and a phone call, i actually called and talked to the guy while i done the form, or maybe he just signed me up, i dont remember because it was like i said in an instant after waiting 10 minutes to talk to the IRS.

The IRS support was very likable, any question i asked, they explained perfectly and easily.. the man even gave me info i didnt know i would need! But i was amazed with the support none the less.

My business setup experience was something i did not expect!!

I, like most, thought oh my god this will be a chore! And it was a snap!

Even getting my general liability of 2 million aggregate, and 1 mill max occurence, was very easy/./.

If you dont start your business today, you will be atleast 1 year older when you do!

Have a dream, envision it, GOPHER IT! ( GO for it!! )

steve, i hope i said that right!!