05/06/2018 at 12:34 pm #39137AshanaParticipant
- Location: Illinois
I am currently trying to figure out if I should register my business as an LLC. I am finally taking steps to make ebay my full time job and unsure what I am doing business wise. Reading the IRS website isn’t making it easier for me.
I am currently a sole proprietorship, with no official business name, business bank account, and I have yet to file anything with the IRS.
I want to have a legitimate business but feel I need to be an LLC.
Is it wise for me to register this or should I wait until next tax season?
I guess a part of me doesn’t feel like it’s a real thing until it is official…
Maybe I am not understanding, but for my state, IL, it seems that the only thing an LLC can do for me, that a sole-proprietorship can not, is give an EIN. I have no current plans to employ anyone, especially in this first year.
I would love to hear what made all of you go from sole-proprietorship to LLC!
05/06/2018 at 1:01 pm #39139MDC Galleries & Fine ArtParticipant
- Location: Atlanta
I would strongly suggest that you talk to a CPA before you do anything else. The things you are talking about do have tax implications that will affect how you pay taxes, how you keep records and what you do have to or not have to pay.
You mentioned “I am unsure what I am doing business wise”. Many of us here who do this full time as a business, even if some do there own taxes, have talked with or use a CPA for help and support. They are your business consultant and partner with you to help to make these types of decisions, when to do it, what type you need and address your questions and concerns to what form of company you should be.
Unless you have the time to teach yourself accounting law I would suggest finding an accountant-CPA that is local to you. Making an appointment and going to see him-her and sitting down and discussing your plans. And, that will be a “good business decision” to make as your first step in transitioning to a full time business.
I know you probably want to hear it all from the members here at SL but Jay will be the first to tell you to talk to an accountant. We are not experts and I talk with our accountant / CPA several times a year about questions involving our business. Our business is ever changing and if you make that relationship now, you will have a friend and tax person to talk, confide and talk to.
I decided to reply to your post item by item if you don’t mind…
I am currently trying to figure out if I should register my business as an LLC. >>> As of yet you don’t have anything to register. You don’t even have a business bank account. Co-mingling personal and business funds is an issue with the IRS. You need to establish yourself as an identity first. A CPA will give you a “To Do” list of the stepes you need to take to do this. And if local, probably names and contact info. to the various Gov. web sites to go to.
I am finally taking steps to make ebay my full time job .. >>> Do you know what all the right steps are? A CPA will guide and help you.
and unsure what I am doing business wise. Reading the IRS website isn’t making it easier for me. … >> A CPA has to know the tax codes, laws and be very familiar with the IRS Publications and bullentins. That is what they went to college and graduate scxhool for. That is what they have to have continuing education on and that expertise is what you will be paying them for.
I am currently a sole proprietorship, with no official business name, business bank account, and I have yet to file anything with the IRS. .. >>> Then I don’t think you are a business. You probably fall into the category as a “Hobbyist” or “Hobby Seller”. Some of the things I have said above and what your CPA will advise you to do, will be the steps you will take to become a “business”.
I want to have a legitimate business but feel I need to be an LLC. … That feeling is great to have. But you need to know exactly how to turn your desire into reality. Why an LLC? Why not a Sub-S Corporation [this is what we are], Why not a C-Corp, why not stay as a Sole Proprietor until you reach a ceratin plateau? These again are the things a CPA will guide you through.
Is it wise for me to register this or should I wait until next tax season? .. Again, the CPA is your business partner and business consultant. Mark Tews who was just interviewed by Jay here on SL can help you, but he won’t be local. You can get advice from many of the SL members here, but most are not professionals in tax code, tax laws, and corporate structures for various incomes and business models.
I guess a part of me doesn’t feel like it’s a real thing until it is official… This will come with time believe me, when you start paying quarterly taxes, have to tract helpers and assistants, set up your Chart of Accounts so you can track every dollar you make and spend, every mile you drive, every item you buy and sell. You will feel right at home with the rest of us..LOL 🙂
Maybe I am not understanding, but for my state, IL, it seems that the only thing an LLC can do for me, that a sole-proprietorship can not, is give an EIN. .. No, it does more than that. Again your CPA will explain the differences between the different business models and the advantages and disadvatages of each. Do you guys have two incomes, whatkids, what will your standard deductions be [especially with the new laws this year, how much do you expect to make???? You will have a lot to discuss with the CPA that we can’t help you with.
I have no current plans to employ anyone, especially in this first year. .. Boy, this is a can of worms. Even years down the road many of us approach the helper and assistant topic carefully. You have to issue a 1099 or a W-2. Withhold their taxes and match them if a W-2., etc., etc. Ask J&R and others. Tread carefully, especially as a newbie.
I would love to hear what made all of you go from sole-proprietorship to LLC! … What made us was, Sales Growth, Volume, a desire to expand, get an assistant helper, insurance, business deductions and write offs like cars, mileage, cell phones, home office space, partial utility deductions, all of which at a certain size made sense AND WE FOLLOWED THE ADVICE OF OUR CPA. He watched us grow and kept us informed as to what he recommended we do every step of the way.
He also told us what was illegal, wrong, what would get us probably audited, if we were audited what would smooth it over, what records we needed, how long to keep them. And he evaluates new ideas we come up with and tells us if we are not thinking correctly or if he thinks it is great idea and why.
So, Good luck…
Mike at MDC Concepts, Inc.
MDC Galleries and Fine Art
SmartParts Small Equipment Parts divs.
05/06/2018 at 1:23 pm #39142JayKeymaster
- Location: Virginia
Im here to say YES! I agree with finding a local CPA to give tax advice. It’s cheap for the peace of mind. Make him/her your partner in these decisions.
Anyone can apply for an EIN as far as I see:
You say: “I want to have a legitimate business but feel I need to be an LLC.”
I never understand where this idea comes from. We have several perfectly legitimate and successful businesses and no LLC.
People say an LLC protects you from a lawsuit. I’d get actually legal advice about that. Explore what exactly you’re afraid of being sued over, and if a LLC will actually protect you. We just buy insurance to cover risk. There will always be risk in anything so each of us can determine how far we want to protect ourselves.
As Mike says, operating under an LLC changes how you report taxes and what fees you pay each year. It’s not a one time thing.
05/06/2018 at 2:18 pm #39148AshanaParticipant
- Location: Illinois
Thank you! I greatly appreciate it. I realized an accountant needed to be involved at some point. I should have realized the beginning would be best. Now I have to choose someone…
Thank you for taking the time to respond to me!
- This reply was modified 4 years, 1 month ago by Ashana.
05/06/2018 at 5:16 pm #39174AdventureEParticipant
Do you guys buy insurance to cover risk from selling on ebay or because of the varied businesses you have?
05/06/2018 at 5:35 pm #39179JayKeymaster
- Location: Virginia
No insurance for eBay. We ask ourselves: “what is the risk of selling on eBay?” Im sure paranoid people could imagine worst case scenarios, but we feel like selling on eBay is pretty risk free.
On our vacation rentals, we have good insurance that covers fires, theft and liability. Again, paranoid people could easily imagine worst case scenarios, but we feel good about the risk of running a rental business with the level of insurance we have.
05/06/2018 at 5:39 pm #39181AdventureEParticipant
That is helpful to know.
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