I have been trapping for quite some time but I recently obtained my Ohio Commercial Nuisance Trapper License and have thought about forming an LLC or something of the sort to grow over time. I am a college student in construction management so i have plenty of time to do some part time work. Anyone have any thoughts, comments, advice on forming a legitimate business versus not and if so, how to go about it...

There are lots of posts regarding this topic in the archives and I've written about it quite a bit in WCT Magazine and the Buckeye Trapper. The best thing to do is talk with an attorney AND a CPA about your specific situation. By law, CPA's are not allowed to create or suggest a specific legal structure as that is considered giving legal advice; however, unless you're working with an attorney who is also a CPA they will not be able to give you the tax ramifications for what you choose.

This is why I recommend talking with both and having the CPA "create" identical tax returns for sole proprietor, LLC, and S Corp using the same numbers (i.e., $100,000 gross revenue, $65,000 expenses, etc.) so you can actually see the differences in how you get classified by the IRS and how it effects the business bank account.

Having said all that and having had multiple companies that were sole proprietor and S Corporation, I highly recommend anyone starting a company always go the S Corp route. Provided you follow all of the requirements (i.e., separate bank accounts, annual meetings w/ minutes, etc.) you not only protect yourself and family but also get better tax breaks.

I'll be at the OSTA Convention Friday morning for a couple of hours but will have to be on the road by 2pm so if you're heading down as well and want to chat about this, feel free to look me up.

You really need to define what you want or may think that you want. If you want a business thats going to grow, and maybe be salable some day, or you have assets to protect, follow Eric's advice. If you are a broke college student looking for some side money but plan on doing something different with your degree once graduated, then buy a few traps and start handing out some business cards.

Either format you choose; general liability insurance is cheap in this industry and protects you and your customers in almost any worst case scenario you will run into.

Do you mean....if you want to stay a broke college student......

Thought I might catch some flack for that answer. I think I qualified my answer enough that it was accurate, and helpful.

I should maybe tell a bit about myself...I am an equipment operator and am usually laid off in the winter. I have since returned to college so now i have even more time to play outside. I have enough traps to keep me busy fur trapping during the winter and would like to begin dabbling in the ADC world. I have enough equipment to work for several customers handling almost any animal situation. I am interested in going the direction WCT is talking about but at a small one man, part-time level. I have looked through the archives but everything seemed fairly broad as to how to start up a business I was wondering if people even incorporate their business or if they just shake hands with a customer and leave it at that. I do like your advice and will be following up with someone who is more proficient than myself at business formation.
I also live on the Ohio Indiana State Line and am trying to find out if an Ohio Commercial Nuisance license is valid in other states, being a commercial license, or if it's only valid in Ohio.

Incorporation is done to limit liability or for tax advantage purposes and doesnt have as much to do with how you relate to customers. I am an above described S Corp but still do business on a handshake.

You would have to be licensed in Indiana to do ADC here. It is a fairly simple test.

I am assuming that I would have to have a physical address in Indiana in order to obtain a license? Through the Indiana DNR?

Not likely

Not at all.There are quite a few guys that have an Indiana license but dont live in IN. After you pass the test you fill out what counties you are interested in working and then they put you on a list. If they get a phone call requesting service in your area they spread the work around to the guys from that area.

Good post...is there a dollar amount that is the breaking point to consider starting a corp., llc etc..?
And at what dollar amount should write offs for expenses come into the picture for consideration?
Been playing around with this idea for years too.

Write offs for expenses should can be done at any revenue level. Its easy to do and reduces your tax liability.

As far as incorporating goes it doesn't have as much to do with dollar amounts and more to do with liability reduction and to reduce taxes.

You can have a sole proprietorship and be doing $1million or an llc and doing $5k. But what happens if you get sued in either case? This discussion might have less to do with your animal removal side business than it does your other assets. What if you just inherited a million dollars in stocks. Under a sole proprietor, you screw up in a business situation and that is at risk. If you do your business under an llc, it shouldn't be, although there are ways to screw that up.

For taxation purposes... in a sole proprietor situation any profit(revenue minus expenses) is called income and subject to your tax rate plus as a small business owner you get to pay both sides of FICA and Medicare, around 15%. As a sub S, I am an employee of my company. The wages I pay myself get FICA and Medicare taken out like a regular employee. My business also pays me a dividend. That dividend is taxed at my tax rate but not the FICA or Medicare. It can be substantial.

It gets complicated and I am not an attorney or CPA although I use to do taxes. You really need to consult your own professionals but at least this gives you an idea.

I did look at the IDNR form and saw there was no mention of needing to live in state, just to pass the test and mention the counties I'd like to work. I guess my question that started this whole post is what would work better for me, S-corp (which i've never heard of) or an LLC? I realize it's all about the amount of liability. The rest of my questions I've learned should be directed to an accountant. I want to thank everyone again for the replies! Any information is good information!

I incorporated and bought insurance before I hd my first customer.

Thanks guys...good info

DaveK, we all hope you get that first customer any day now.

You really should go talk to a CPA who has the time and actual knowledge to explain the different structures, or read up on it.

Sole proprietorship vs corporation is about liability, not money

LOL

A subS corp does not pay any federal tax. The federal tax filters through to the shareholders. If your sub S corp. has a loss, the share holders get to deduct that on their personal return. If you post a gain, the share holders must add that to their gross.

When we went full time we incorporated. By using this method, we are allowed to send everything we make to the Internal Revenue

Service. They take out what they need to finance wars, give money to our enemies, pay for food stamps, welfare, and other socialistic

endeavors. They send us back enough money for bread and water. They disguise the whole operation by calling it the "Free Enterprise" system.