Good evening all,

When setting up an ADC business would it be best to operate as an LLC or a sole proprietorship?

Going the LLC route seems to provide some liability/asset protections that make it pretty attractive.

I imagine each has its advantages.


Thanks. Mike

You should speak with an accountant and lawyer about it. Legally, the accountant cannot give you advice on what to create, but they can talk about the tax ramifications of each while the lawyer can suggest and help create the business but cannot give tax advice.

Just to give some quick info to get you started, there are several different pros and cons for all of the different business structures (sole proprietor, partnership, LLC, S Corp, C Corp, Non and Not for profit). The reason why LLCs are so popular are that they supposedly give you some legal protection if you are sued. This may or may not be the case as you can still be sued saying you are running the business as a sole proprietor and try to get you reclassified for the lawsuit. Unfortunately, a lot of accountants and lawyers assign a dollar value to these structures like $75,000 or less - sole proprietor, $75,000-$250,000 - LLC, $250,000 - $1,000,000 - S Corp, $1,000,000+ - C Corp, etc. This is why it is best to learn about the different structures, how they are taxed (Schedule C, 1120S, or 1120), business requirements (allowed losses, bank accounts, tax ID number, officers vs. owners, payroll, property taxes, insurance requirements, etc.) before just picking one as it is a pain to change business types as you grow or make changes to the business.

Thanks WCT. I meet with a CPA on Tuesday so at least I can speak with him on the tax ramifications. I worry about the potential for a lawsuit. A kid tampers with a box trap and gets a nasty bite from a raccoon you can bet what will happen next. I guess thats why having adequate liability insurance is an absolute prerequisite.

Mike,

Just remember that there is nothing that will ever prevent a lawsuit. The best defense for something like that is to always be thinking about defending instead of preventing. Part of defending is to have liability insurance and always remember the immortal words of Ron White, "You can't fix stupid."