IT Consulting in upstate NY - sole proprietor LLC questions

Discussion in 'Starting a Business' started by timdafweak, Jul 7, 2011.

  1. timdafweak

    timdafweak
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    Hi all,
    I have been a lurker here for a while, gleaning information from the enlightened members here.

    A friend of mine would like me to do some consulting work with his company, and advised me to start an LLC or S-Corp for obvious reasons. From what I have learned, mine is a relatively simple case. I would not have any other members in my "company" and will operate this endeavor in addition to my current job.

    That being said, I do wish to go the correct route. I have a couple of questions:-
    a) Am I correct in assuming I would benefit from an LLC instead of an S-Corp?
    b) Should I even bother incorporating elsewhere (other than NY state)? What ramifications would that have to me operating in NY? Do I need to register as a foreign entity, or can I invoice my friend and have him pay me without issues?
    c) Money is tight, do you recommend going with an online service like LegalZoom or MyUSACorporation to form an LLC? I hear lawyers can charge a pretty penny for this, often to the tune of 1000-2000$ in addition to filing fees etc. I got a quote that's less than half that from one of the sites.

    Any help would be highly appreciated!
     
  2. ArcSine

    ArcSine
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    Greetings, Tim! Re your questions...

    a) An LLC and an S-Corp will provide you with equivalent measures of liability protection. There is an advantage to an LLC where (as in your case) the entity is to have only one owner. A "single member" LLC does not have to file its own separate tax return. Instead, you'll report the LLC's revenues and expenses directly on your own personal return just as if you were operating as a sole proprietor. This does NOT in any way put the LLC into some sort of inferior status relative to other LLCs, with respect to its liability protection. This is purely a benefit granted to one-member LLCs solely to help simplify the tax return prep burden. With an S Corp, OTOH, you'd have to file a corporate return for the entity in addition to your own 1040. Not such a big deal, but it'll cost you either your time figuring it out, or an accountant's fee.

    b) I see no point in having your entity domiciled outside of your home state. The benefits of incorporating in certain states (Delaware, notably) are valuable only in situations involving complex multi-creditor arrangements, multi-layer capital structures (esp with minority interests in the picture), and other similar set-ups.

    c) An online service is a viable alternative to having an attorney handle it. Couple of other options you might wanna have a peek at:
    • Setting up a simple LLC or corporation (esp a one-owner deal) is simpler than most folks realize. You might check in with a few local accountants (small one-office types who handle acctg / bookkeeping for small biz). It's likely that you'll find one who's done a few LLC and corp setups, and is familiar with the procedure. Such an individual could have you up and running at a much more reasonable fee.
    • Staying with the "it's pretty simple" theme, have a look at this page in the NY Sec of State website. After browsing through the site---and particularly these FAQs---you might decide to plunge ahead with a do-it-yourself setup.

    Remember to pick up a Federal ID number for your new entity, which you can obtain here.

    Best of luck with it!
     
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