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What is the best thing-Incorporate or LLC or something else?

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Debra

Thread Starter
Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Tennessee
Hello!

Currently I'm self-employed and have a business name. What is the best thing for appraiser to do for tax purposes and legally and monetarily-keep it like it is or get incorporated or LLC or something else? What are the benefits/drawbacks to each? How are you doing business? Thanks for advise! Debra :) :?
 

Ted Martin

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified General Appraiser
State
Kansas
You may want to talk to your tax proffessional and see which type they are the most comfortable with. We had a fit of a time finding anyone that really understood the Corp. structure, most of the our local tax people are more familar with the LLC format. Given that there are advantages and disadvantages to both structures I am coming to the conclussion that picking the "wrong one" but having a tax person that knows all the tricks and traps for that format is better than picking the right format and bumbeling through the tax prepartation every year.
 

Mike Garrett RAA

Elite Member
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Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
In addition to tax people your attorney should advise you on the different types of corporations. S Corps are used alot for small businesses. It avoids double taxation with earnings passing thru to the share holders. One thing to look into also is the amount of time necessary to do the required tax work. Once incorporated the cost of maintaining the corporation is usually minimal.
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
The problem with an S corp is that it is a 'closely held pass through' which precludes many 'self-employed' deductions and writeoffs for retirement, health, etc. which are available to other forms of ownership.

I think S corps first developed back in the late 70's, and you are best off to find a tax advisor AND attorney who is in his/her late 40s who just maybe REALLY understands them! S corps were developed to solve the 'big corporation vs itty bitty' problem but a few quirks have occurred as the rules changed over the years 8O .

The S corp is sort of a +++++ child and it is particularly critical that you receive expert advice on this form of ownership if you are going to hold any property, maximize deductions etc. Getting set up correctly is also critical interms of long tern tax issues - I know cause mine should have been developed differently :roll: .

FINDing advice on thses important matters is a little difficult as most accountants will TELL you they are expert, but their expert advice runs counter to IRS and the major tax preparations programs answers!!! (They also tend to charge you like you a re a 'C-corp) :roll: All that said I have my biz in S-corp!

The LLC format is becoming the more preferred for many/most small legal and accountanting and medical firms -- I have to assume for a reason. I have looked a couple times at changing formats, but at present it is sort of the devil I know :evil: vs. the one I don't 8O .

I am too tired to want to go down learning curve road at full speed :oops: . IF this crazy biz dies down a little and I have some time I am considering the switch.
 

Jeff Horton

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Alabama
By all means talk to the your CPA AND Lawyer. They both look at it from a different perspective so weight what each says against the others advice.

I incorporated as an S Corp several years ago. When I got into the Home Inspection side a buddy of mine was just setting up his own law practice and leaving the huge firm he was working for so he could move back home.

The LLC was still fairly new in Alabama at the time and he set his Law firm up as an LLC. He was also setting up a mutual friends electrical company at the same time he did mine. He set him up as LLC but told me to go S corp. He didn't go into details but he said it was to my advantage since I was adding the Home Inspection side of the business. He just said if I did an Inspection and house burned down shortly after that and a someone was hurt that I wanted to be S Corp. I never questioned his wisdom and just accepted that.

As for taxes I don’t think I pay much more than I did as a Sole Proprietorship. I think I pay the state $100 every year to keep my corporate status. I do pay my accountant a LOT more because the tax forms are awful!! I did them myself the first year and filled for 2 extensions and was still late. I said then NEVER AGAIN. I found an honest accountant and I write him that check every year and say thank you and feel good about it!!

To me the biggest advantage to being incorporated is that if my business is sued they can only go after my business assets and not my personal. In other words my house is safe! That to me is worth the cost of it.
 

mikegoff

Sophomore Member
Joined
Jan 28, 2002
Professional Status
Certified General Appraiser
State
Florida
Hi Debra,
We use a sub S corporation because we keep no assests (cars, computers, boats, planes, space shuttle, etc.) in the company name. If you are going to depreciate assests through the corporation, you are probably better off with regular corporation. The sub s is simpler for tax purposes. We did it the cheap way, $100 bucks to incorporate and set up our own accounting (quicken). A close appraiser friend, who just recently set up their sub s, went through an attorney and cost was around $750. The more complex the corporation, the more it costs to set up.

This will be the basis of your business. It is a decision to seek expert advise on (attorney or CPA), especially if you are not familar with tax advantages/disadvantages of a particular business structure. Could be the best $1,000 you spend. The Sub S corporation acts as a buffer for deep pocket attorneys looking to score (no assets in corporation name). And it adds a little corporate veil for nosey people. Once setup, it is easy to maintain and adds a professional image. Lots of luck
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
We talked with our CPA and in Texas, it was better for us to remain a sole proprietorship with no LLP, LLC, etc. Because of the Texas tax laws, if we incorporated, the taxes would actually increase. The moral of this is that every state is different. Talk with a CPA.

Roger
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
To me the biggest advantage to being incorporated is that if my business is sued they can only go after my business assets and not my personal. In other words my house is safe! That to me is worth the cost of it.

They have a choice, sue you or the corporation.

An S corp. benefits you when you pay less in Social Security, pay yourself more in non-social security taxed rents and dividends, than what it costs you the more in fees and extra tax return.

Many tax preparers recommend you incorporate so they can do 2 tax returns for you at inflated rates.....Find an honest CPA (I guess that is not an oxymoron)
 

Terry Russell

Senior Member
Joined
Feb 24, 2002
Professional Status
Appraiser Trainee
State
Montana
If you are like many of us and desire to be self-informed on issues concerning your business I would suggest visiting the SOS website in Tn.
http://www.state.tn.us/sos/service.htm

There is an abundance of information there and I would suggest a phone call to business services and tell them your plans and I believe they would have info packets they can mail out to you at no cost.
Then after all that if you still want to pay for an attorney and a CPA to tell you what you should do then by all means call them.
It sounds to me like you are possibly a one- person enterprise. A family-based LLC would be my suggestion. All depends on your situation and plans for the future. Good Luck.
terry
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
:lol: Terril: Some states preclude suit of the individual when acting on behalf of a corporate entity, so those posters may be correct (in THEIR state only!) and some other states have 'special' laws that preclude hiding behind the corporation (like mine :twisted: ) meaning that in case of a suit I get to defend myself twice :roll: and only the lawyers will prosper :evil: becuase there ain't much there to sue for :wink:

The central theme in all the above answers is "see a lawyer and an accountant -your state may vary"!

Another resource often overlooked is the Small Business offices typically associated with local Universities. Services vary but the best thing is that they are often FREE!!! I have received free accounting time, free business advice, documents on a variety of programs and free research on problems!~ and did I mention that it costs NOTHING!?!?!

~~~~~~~~~~~~
To which I would add: any one of us who is prudent should seek a HIGHLY competent financial advisor -- good luck finding one of those :roll: - who can point you hopefully to a lawyer and an accountant and get you the results you need as a cohesive team...OK I'm dreaming right?.. except that I am not dreaming I have this set-up and found folks who are willing to work as a team on a budget I can afford!

I know just what you wanted, more dependents... but at least you get to write these guys off at the 100% level :D

I see NOTHING wrong with spending a few bucks to save a bunch more from fiduciary waste by way of unnecesary taxes... I'll DONATE to causes I see fit rather than adding it to the slushpile which gets spent by our current crop of politicians...
 
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