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Corporation vs. sole proprietorshipQuestion
Forum Responses
A point to remember is that when you're a small shop, anything you do on the job can and will be viewed as a personal action on your part, thus eliminating the corporate veil. A good insurance policy will protect you more. Also remember the word "sole"--that does not include your spouse. You are the proprietor, not both of you. This will give some protection of joint property in the event of a catastrophe. Get the advice of many and sort out what will work best for you. It is also easier to borrow money if you need to as a proprietor.
Aside from the liability issue, incorporation for the small guy is hocus pocus and the above is right about transferring monies. On the upside, my accountant assures me that I am saving money… trouble is, I can't find it. I pay myself peanuts and get money out in lease agreements with my machinery. Now I am knee-deep is shells and my machinery has chosen not to exercise first option. Oh well, guess the fiber is good for the chute. Life was easier when I just robbed Peter to pay Paul. If you can beat taxes by incorporating, just do it. I ran to the attorney for incorporation after one of my guys got into a little fender bender. He not only rear-ended one car while looking in the rear view mirror he nailed three and totaled my truck. I had so many people suing me that I was afraid that I was going to lose everything. My insurance company, with their team of lawyers, kept everything under my limit. This lesson taught me that I don’t make enough to be low bid to get the job and then have to be responsible for everyone and the work that they do.
From contributor A: If you have a business plan and that plan is to grow beyond you and a few employees, then a sub chapter -S corp is a good blend of corp and sole proprietorship. If you plan on staying small, then the sole proprietorship may be better. From contributor F: That is an interesting statement. Does California now recognize the Sub S or do you have another reason? I've not done business in the Golden State for several years, but the Sub S used to only satisfy federal considerations there. From contributor A: We are a subchapter S and have been for 11 years. I don't know when they allowed it but we talked about it for a few years, so I would say at least as far back as 87. We are also forming a LLC and a C to reallocate assets and shift tax burdens (reduce taxes). From contributor F: I preferred the 'C' for the same reasons. The LLC has become a real favorite of attorneys (for their clients) and CPAs as well. I look at it once a year but haven't felt the need lately and may never, but my situation is unique. I work now for the fun of it and working alone keeps it fun. Nevada has a nice tax situation. We are a Sub S, as recommended by our lawyer. It treats income much like a sole prop, but gives limited liability protection. We carry a million dollar liability coverage and an additional million dollar umbrella, and still keep the assets of the corp low to avoid losing everything in a multi million dollar award. There are way too many lawyers in the world. Would you like to add information to this article? Interested in writing or submitting an article? Have a question about this article? Have you reviewed the related Knowledge Base areas below? 
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