Filing as an LLC Need some advice!

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brownbob06

New member
Hey guys, as some of you know from past conversations I've been detailing for a couple years now.


 


My current situation: I started off detailing vehicle for my family mainly and it was keeping me decently busy. I would just do them one of my uncle's places, at my home or at the customer's home. I don't have a set place of business or even a garage that I detail out of. All of this has actually been going really well and I'm happy with the money I make doing it as a side business (in the spring/summer I actually make more than I do at my real job quite often.)


 


My problem: The problem is that since I started doing it for family and friends I am now starting to get more and more business from people I don't know through referrals/ facebook posts and all that good stuff. This isn't necessarily a "problem" the problem is that I'm not officially a business.


 


I've been thinking about filing as an LLC to basically cover myself since I'm beginning to work on more and more vehicles. I understand I'll be looking at around $300 to file myself and more if I decide to use a lawyer to file, but my questions are:


 


How much more is it going to cost me to be an LLC Vs. what I'm doing now? (Which is basically all cash with no taxes or writeoffs or anything like that.)


 


Do I have to worry about paying taxes and reporting my income?


 


Is it necessary to hire an accountant to handle taxes and such?


 


Can I file the taxes quarterly since I get nearly no business in the winter?


 


In case you haven't noticed I'm REALLY lost on this so any info is helpful. I'm REALLY sorry if I sound like an idiot, just trying to get some more info.


 


I'm in Ohio if that helps.
 
Hi Bob, my best information, in BOLD  below...
brownbob06 said:
 


How much more is it going to cost me to be an LLC Vs. what I'm doing now? (Which is basically all cash with no taxes or writeoffs or anything like that.)


That depends on A LOT of factors... but ultimately, you shouldn't worry about this because legally forming your business trumps the cost.  


 


 


Do I have to worry about paying taxes and reporting my income?


Yes, as an LLC, you file a Schedule C along with your 1040.


 


Is it necessary to hire an accountant to handle taxes and such?


No, it's not.  However, if you don't file your own personal returns, then I would advise a CPA


 


Can I file the taxes quarterly since I get nearly no business in the winter?


With an LLC, I file excise tax yearly in my state and income tax with IRS annually, not quarterly.  With an S-corp, you file quarterly... which adds to the transaction costs for you (either in time expended if you do the filing yourself, or paying a CPA to do it 4 times a year).


 


In case you haven't noticed I'm REALLY lost on this so any info is helpful. I'm REALLY sorry if I sound like an idiot, just trying to get some more info.


No problem... keep asking if you are not sure.  But, you have to do some legwork as well because State/County/City laws can affect any feedback given.  Call your Sec. of State's office in Ohio and read your county/ city laws as it pertains to business taxes and their reporting.  Also, you should keep abreast of any zoning, land-use, water use, regulations to ensure that these will not hamper your venture or add additional cost to your operations via compliance or fees/ permits.


 


I'm in Ohio if that helps.


Best of luck!


-Gabe
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I guess I'm hesitant because to call because I would basically admit to them that ive been doing it for a while now and haven't reported an income and am a little scared of getting in trouble for that :/


My next question is, if I set aside something like 10% of everything I make will that cover what I have to pay in at the end of the year?
 
There was a great thread about this.

I think it was titled I just filled llc.

Lots of good info on other thread.

Not that this is a bad thread, it just would help others

to have add much llc info and questions in one place as possible
 
brownbob06 said:
I guess I'm hesitant because to call because I would basically admit to them that ive been doing it for a while now and haven't reported an income and am a little scared of getting in trouble for that :/


My next question is, if I set aside something like 10% of everything I make will that cover what I have to pay in at the end of the year?
Click to expand...


 


You don't have to identify your person to them.  I didn't and my business was already formed.  Tell them you are thinking about filing as an LLC and you need the B/O rate for your location and any other question(s) you may have. 


 


10% would not cover your excise + federal taxes... as an LLC you are taxed on every dollar you earn... that is the 'downside' to this legal entity.
 
Read through that one a few times. The questions I'm asking are essentially financial questions though that weren't addressed there. And I believe what you are referring to is called thread-jacking lol. Im not going to take away from someone posting their accomplishment with my questions.


I'll try to find some business owners who are in close to the same situation about how much to expect to pay in. Im just lost on the tax side of things in this.


Just may be hard to find a sole proprietor with no fixed place of business lol
 
I'm not a CPA and I'm not a tax lawyer so take the following with a grain of salt...


Doing a little googling yielded these links which you should check out...


 


Regarding Ohio's B/O (Business & Occupation rate/ tax)


http://codes.ohio.gov/orc/5739.02


 


Ohio Sales Tax (have to enter an address to get your rate... since you are looking to be mobile-- I assume anyway-- you would enter your home address)


https://thefinder.tax.ohio.gov/streamlinesalestaxweb/default.aspx


 


Then go to your county's website and search for sales tax along with business license (if needed) fees there.


 


In a nutshell... 


 


 I can't quantify your total effective tax rate because of a myriad of factors.  (Don't answer the following) Most notably, I'm married, I don't know if you are.  I file jointly my tax returns.  Maybe you filed individually.  My household income may be more or less than yours. And so on and so forth.  These plus about 1,000 other metrics affect my Federal tax rate for my business and your metrics will affect your Federal tax rate for your business.  See where I'm going with this?  It's just about impossible to give you an accurate figure of you'll pay X if you gross Y.  And I'm not even mentioning the business side.


 


On the 1040 schedule C (business side) you will have business expenses once you legally form your business.  So these 'business expenses' (read- purchases, gas, insurance, blah, blah, blah) are 'write-offs', to a degree.  This 'degree' depends how good of a record keeper you are and how versed you are regarding the tax laws of your state and of the Federal Govt.   


 


If you want to do a worse case scenario... take your best year of doing things on the side and calculate your net with all maximum tax rates considered (city/county/state/federal).  At least you can be consoled knowing you should be paying less (if you grossed the same) than this amount once you form an LLC.


 


Get a CPA... and not just any CPA.  Shop around, like you would for someone worthy enough to detail your own car.  The right one will explain business formation and pros/cons with each structure.  And they will be there to take care of you come tax season.
 
keep in mind, even if you are an LLC, you are personally the one doing the work on the car, so people can still sue you personally.  hence the reason that a sole prop is cheaper way for owner operated businesses.  If you have employees, LLC is the way to go!  all the same tax breaks (unless you own a home, work out of it, etc...talk to your CPA)


 


If you are flying under the radar now, expect a HUGE hit in taxes once you claim everything. (read as you will make less)


 


Here in CALI, its 800 a year to be an LLC...so consider your 300 cheap
 
You can do sole prop and just get business insurance too. I am sole prop and am going to sit down with my CPA this year to discusss LLC or stay sole prop with insurance.


 


I claim everything and I have no choice because of my real job. I keep meticulous books lol. You also can write off a ton of stuff too. Phone, internet, supplies, mileage, meals with clients, travel to car shows and detailing seminars, products, equipment, books, training.........etc. If you work out of your home you can write off a percentage of your utlities (gas/water/electric) used for detailing cars, office space, garage, computer, computer supplies.............etc
 
blah. Maybe I'll just go with a sole proprietorship and business insurance. I have a full time job and just do this on the side so I'm not sure if it's worth so much hassle and paying for the LLC. I've had a sole proprietorship in my county before and it was actually fairly cheap. MUCH cheaper than forming an LLC.


 


I'm not making so much doing this that I can afford to hire a CPA AND give 40% (the way it's sounding) of what I make to the government.
 
brownbob06 said:
blah. Maybe I'll just go with a sole proprietorship and business insurance. I have a full time job and just do this on the side so I'm not sure if it's worth so much hassle and paying for the LLC. I've had a sole proprietorship in my county before and it was actually fairly cheap. MUCH cheaper than forming an LLC.



I'm not making so much doing this that I can afford to hire a CPA AND give 40% (the way it's sounding) of what I make to the government.
Click to expand...


I've struggled with all of this myself
 
House Of Wax said:
I just started dabbling in this for money at the end of the year last year, so I haven't really come to a decision yet
Click to expand...


 


Gotcha. Yeah, I did the same thing 2 years ago at the beginning of the year and, so far, it's much better than getting a part time job. I make a lot more and certainly enjoy the job much more than I would a part time job.
 
Agreed. My only real intentions at this point is something to play around with on the side and make a couple bucks while still being around my family on the weekend
 
I do this full-time as decided to operate as a sole proprietor for the simplicity of it. I also have a great insurance policy to cover my a$$ if things go awry. In your situation go for simple but remember to have insurance in case anything does happen. 
 
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