Change Sole Proprietorship to LLC

[Regina Farmer]

I own a small children's store as a sole proprietorship. My husband & I together own a 2 store fast food franchise. I need advice on what the rules are for changing both businesses to an LLC? I am looking all over the Internet for information. I want to make sure the tax liability structure is in our best interest while protecting our personal assets.
I want to do this immediately. What is a fair price to pay someone to do this? Does a lawyer have to do it? Thanks for any help.
R Farmer

[eightmanagement]

Check out www.mycorporation.com. I would advise registering in Delaware as their state fees are the lowest besides Las Vegas; very common business practice. Probably want to set up 2 separate corporations, one for the children's store and the other for the franchises.

Who handles your taxes now? This will change your entire reporting structure, so you may need to hire an accountant if neither you or your husband are familiar with corporate tax filing.

[Regina Farmer]

Originally Posted by eightmanagement

Check out www.mycorporation.com. I would advise registering in Delaware as their state fees are the lowest besides Las Vegas; very common business practice. Probably want to set up 2 separate corporations, one for the children's store and the other for the franchises.

Who handles your taxes now? This will change your entire reporting structure, so you may need to hire an accountant if neither you or your husband are familiar with corporate tax filing.

We have an accountant that we pay a lot of money too but he has never been very helpful. He charges $35.00 for every 15 min phone call and we have to use a CPA. I think he is outrageous for the poor quality of service we receive. It is not my decision to use this company. We are small fish in the pond he owns. We have to send P&L's certified through a CPA as required for the 2 restaurants we own every month.

I do not want to pay this person several thousand dollars just to set up a LLC if I can do it myself. I have full control of what I do with my children's store. In the franchise, my husband has 51% and I own 49%. He is not very good with change and works 6 days a week. I have usually handled all finances. Do I have to have an attorney in SC to set up an LLC for my business? Do I have to have an attorney to set up our franchise as a LLC? We have been sole proprietorship for 12 years. That should give you an idea on the advice and financial help we receive. Our assets are not much but would like to protect them. I just wanted to do it myself if it was legal and allowed.

[Peter T Davis]

$35/quarter hour isn't too bad, but if you're getting poor service you should go to someone else no matter what you're paying.


Joshua,
If someone incorporates in Delaware, don't they still need to register as a foreign corp in their home state? In many cases, wouldn't that increase expenses rather than reducing them, particularly for small businesses? I am under the impression that registering in Delaware (or more recently, Nevada) is something that larger corporations that have presense in many states are doing, while a small corporation only doing business in one state may as well register just at home.

[eightmanagement]

Peter,

Yes, they do. But the service can file that paperwork for you. Otherwise, it's easily found on your state's website or through the secretary of state's office. No, quite the contrary. Many small businesses are registering in less expensive states due to the reduction in seed money required to start up.

Regina,

No, you do not need an attorney. There are several services like the link that I gave you, who will set you up for a few hundred dollars. Many times you can call them and get a reduced fee for multiple filings. Also, if you are unhappy with your CPA, contact the AICPA (www.aicpa.org) or your local society of CPA's (http://www.scacpa.org/index2.cfm) for a list of registered CPA's in your area. Normally I would offer my services for a reduced cost, but I am not yet a CPA so you'd still be in the same boat. $140/hr is high for a CPA not performing an audit, you can definitely find less expensive and better service.

Good luck.

[Regina Farmer]

Originally Posted by eightmanagement

Peter,

Yes, they do. But the service can file that paperwork for you. Otherwise, it's easily found on your state's website or through the secretary of state's office. No, quite the contrary. Many small businesses are registering in less expensive states due to the reduction in seed money required to start up.

Regina,

No, you do not need an attorney. There are several services like the link that I gave you, who will set you up for a few hundred dollars. Many times you can call them and get a reduced fee for multiple filings. Also, if you are unhappy with your CPA, contact the AICPA (www.aicpa.org) or your local society of CPA's (http://www.scacpa.org/index2.cfm) for a list of registered CPA's in your area. Normally I would offer my services for a reduced cost, but I am not yet a CPA so you'd still be in the same boat. $140/hr is high for a CPA not performing an audit, you can definitely find less expensive and better service.

Good luck.

What are the main differences between being a sole proprietor and an LLC? I have read a lot about it but I need simple english. It seems that the tax is the same unless you have several people involved and depending on the type of business. Why become an LLC if it is treated the same for taxes? If someone could tell me that in laymans terms I would be grateful. I have already located the appropriate forms in SC in the Sec of State office. Thank you.

[breakit4321]

Regina,

I see this post is very old, so you may have found out your answer by now. I don't know a whole lot about this, but I'm currently researching this stuff myself. I'm pertty sure that the difference of an LLC and a sole prorietorship, is that an LLC offers the protection of your personal assests. Which a sole proprietor does not. An LLC also bypasses the "double tax," in that the profit is only taxed when it's passed down to the shareholders.

Basically, an LLC has the tax benifits of an S-corp, and none of the investor limitations.