Small Business questions.

[SeanCallan]

Now that my e-commerce development as really taken off; I'm considering starting my own small business with a fellow developer, but I have a lot of questions.

I've had people tell me to 'incorporate' what all does this do for me?

What are the advantages to a partnership?

I know a lot of members on here own small businesses so any information about how to do this would be appreciated.


Silly Question: If I work from home, can I write parts of my tank off as a business expense?

[Fins Reef]

Sean,
First I would recommend to find a good accountant. They will be a valuable asset. Personally I would do a LLC(Limited Liability Corporation). But that would personally depend on how much business I was projected to do. You can write off anything you want on your taxes, but not getting caught is the hard part
By going INC, it protects some of your personal assets. Also do no go in 50/50 if you can help it, try to get the majority of control at least 51/49.
HTH,
Brian

[SeanCallan]

Great thanks for the input.

As for the partnership, I don't know if he would fly for that, I mean I've had the idea for awhile, but we're both equal in the development process. It'd be hard to argue why I should control a majority.

[Orion76]

I dont know the exact details about the US so don't get offended but generally a company pays corporate tax on profits which is lower than if you are taxed as an individual. In my native Holland for example a company pays 35% tax on profits while an individual pays 35% to 60% depending on his income so if a high earning freelancer would not incorporate he'd be charged 60% instead of 35%.

Also in a limited company the partners are only liable for what they put into the company, as an individual you can be liable for everything you're worth when you get sued.

Unless you have something like a waiting room, like a doctor who has his practice at home, you are probably not going to be able to deduct aquarium expenses.

[SeanCallan]

So, if I went with an LLC and didn't invest in it, but rather when we made money, we left some in a company account. I personally could no be held accountable for anything, technically right? As I have only invested time, not money.

[Orion76]

I don't know about American corporate law so don't hold me to it but say for example someone would take your company to the cleaners then they could only seize your company assets but not for example your house, your personal checking account and your car etc.

Unless it's your wife doing the sueing of course, then you're screwed both ways

[Fins Reef]

Sean,
LLC are for asset protection, ie your business goes under, then they can not come after your personal assets as easily. That is why with alot of company's I do business with, I have to sign a personal guaranty. To give them some recourse of action if I default. That is a net shell, I will e-mail some more detailed LLC info later tonight. You still have to pay taxes on your profits and file a corporate tax return for you business.
You also have to pay a yearly fee for a LLC, $200.00 IIRC

[SeanCallan]

Heres something for you then,

Why is it most small business have an LLC sitting on top of them? For instance the individuals who have just contracted My "company" are artists, their site is www.blah.com and blah is the company name. However, they make mention in the contract of blah, just being a part of example, LLC.

Why is that? I always thought it mean "Limited Licensing Company"; now that I know I'm wrong, I'd love to know why people usually have an LLC as the parent company..