First off, I know this post is in the wrong forum, but as I’m not a member yet, the system wouldn’t allow me to post under the General Inspection page.
I’m in the process of starting up my business, and am just about ready to file with the Secretary of State (Tx). I’ve basically decided to incorporate, but was wanting to get a few opinions from you, the seasoned professionals.
How many of your businesses were set up as corporation, LLC or sole proprietor? Because of liability issues, I’ve ruled out forming as a sole proprietor for all intents and purposes. But maybe I’m overlooking some benefit.
Any help y’all could provide would be appreciated.
Corporation, even Sub chapter S is a lot of paperwork and major tax forms.
The LLC was created for businesses like HI’s, some doctors have LLC’s too.
Make sure when you file the Articles of Organization you include an Operating Agreement that states you are doing limted, general, visual home inspections based on xxx standards of practice. Its not required in most states but is a way to make a record of your intent.
I would speak to a lawyer before making your final decision. Forming a corporation or LLC may not give you the protection you are seeking. In TX we are required to have our names and license #s on every report. This could be seen as representing yourself as an individual and not as a corporation or in a “corporate” manner. It may leave the door open for an attorney to “pierce your corporate veil”. I chose the sole proprietorship route.
I just went through this a few month ago. I choose to go with an LLC after talking to an attorney. When I talked to my tax guy he said that I should have set up a sub S corp for the tax reason. Both protect you as an inspector so talk with your tax guy and see what they say.
I have a C corporation as recommended by my attorney. So you can see it’s a mixed bag with no definite answers. Even the attorneys get confused. One thing I know for sure about this mayhem is that many are drawn to an LLC believing that is the most secure - it isn’t. Maybe the words “limited liability” are attractive to a new businesss owner. My worthless attorney claims a properly set up corporation, no comingling of funds and solid record keeping may prevent the loss of personal assets. That’s of course if you’re insured.
Sometimes you need to arrange all of the Players at the same time.
Owners, Partners, Attorneys and Accountants at the same meeting to make sure all are on the same page and that all needs (Liability & Tax consequence) are addressed.
The only liability protection afforded by being a corp. is financial liability (not personally responsible for the corporations debt, bankruptcy, etc). You can still be sued for negligence or whatever. The corporation shield is easily broken through. What it does give you is another layer someone has to go through and if a person doesn’t get a lawyer because they think they can’t sue a corporation, then it’s done some good.
The tax benefits are easy though. Have a lawyer do all the initial setup of a S corp. and then it’s only a small yearly fee (100 bucks)to have him file the yearly paperwork. If you do an LLC all of your income is subject to the 15% self employment tax plus income tax. With an S corp you pay yourself a small salary(IRS says you have to pay yourself a reasonable salary) and that is the only thing subject to self employment tax, the rest of your income can be claimed as dividends and you only pay income tax on it. Do the math it’s an easy choice.
