Forming an LLC (or other) for contracted design work?

[Seanz0rz]

So I figured I'd ask here since a few of you are business people.

I have started doing some design work for a firm. I will ultimately be providing production ready drawings to my client for him to produce, market and distribute in trade for some lump sum of cash (haven't worked out payment details yet)

Question is, should I form some sort of business to protect my self from liability claims, contract disputes, etc. and to make my design business more legitimate? and if so, should it be an SP, LLC, etc?

Eventually, I would like to start my own business of a different type, doing offroad fab and outfitting.

Any guidance from those who have done this? I also don't have a lot of money to hire an attorney to figure this out for me, hence the whole working for myself, doing what I can to earn any money I can!

Thanks!

[Good Times]

The easiest I would think is to just 1099 yourself as an independent contractor making the designs and make sure you have a full liability release with the manufacturer so you make sure you're free from any liability on the finished goods that's being manufactured. No cost here.

Long term if you're going to be opening shop then at that point you can go LLC/S Corp which many do for tax purposes or you can go big and do the C Corp but I'd say that's probably beyond the current scope. Whatever corporation status you decide on there's a bit of cost involved. First you'll want to decide where you want to incorporate your company (each state has different corporate laws so you'll want to find one that best protects your needs). Most usually just incorporate in the state they're in. If you end up incorporated out of state then you'll need to file a foreign corporation/entity form for CA which is something to keep in mind.

Most of the corporations I've setup, I've used my own counsel who drafted the corporate docs and then I just filed it with the appropriate city/state to make sure I have all of the licenses required to be able to conduct business.

Hope that helps.

[4x4mike]

I got close to forming an LLC for something I designed. The design was an idea of a random woman that was sent my way. She had money to try to get it patented but I had the product. I wasn't sure if I was going to sell her my idea/product or become a partner. She hired a lawyer and he was going to start the LLC. Long story short she ran out of money and we split ways.

My FIL created an LLC for his business to personally protect himself. FWIW he has a store front, employees, delivery trucks and sells furniture. That was too much liability to hold personally.

[Seanz0rz]

yeah, my further research is basically telling me to set up as a sole proprietorship, a fictitious business name, set up a business bank account, and toss my paperwork towards a friendly CPA come tax time. I am going to go ahead and start using my business name for the business I eventually want to start so I can establish the name and maybe get it out there a bit.

well see. I got a ways to go until I need an LLC. basically once I move from my home office to a store front/shop with employees.

thanks for the help! any other advise?

[Cebby]

I'm involved in 3 actual businesses, soon to be a 4th.

I have an S-Corp (Cebsource Inc - my business services company, no employees but I sub some work out & 1099 them), an LLC that I just created with a partner for an online e-commerce business and I'm part of UltimateYota LLC. Also looking at starting another LLC for a consulting business a buddy and I have been talking about. I have no storefront and while it's a possibility down the road, it's not entirely necessary for the stuff I do.

My S-Corp was formed back in 1999 and has been my umbrella for all the stuff I get into - not just web development, all sorts of stuff. I used a service out of Arizona to do the paperwork and get everything together. IIRC it was around $500 back then.

Obviously the UY LLC is just for fun and needed to be slightly formalized when we all jumped ship and set this place up. Andy handled the setup of the LLC, so I wasn't really involved in the details of that one.

The LLC for the e-commerce business was recent. I used Legalzoom.com and it was very easy. I think we have $400-500 into it for the various services & such needed to setup an LLC. When I do another one for the new venture with my buddy, I'll use Legalzoom again - it was very simple and the Legalzoom communication and support has been great.

I'm also the president of our local athletic association (7 years) - a 501c3 non-profit with 4 officers & 12 additional board members. It's interesting work and gives me a chance to apply my business knowledge to improving the association. We run 4 programs for 4 sports throughout the year and service over 1000 of the area's youth annually. This position has also allowed me to get my feet wet with grant writing and community projects. We do a lot of fundraising and have done big community projects (well, big for us). I've also been tapped to do some things for the local planning commission and other borough related projects due to my involvement with the athletic association. Crazy how small towns work that way...

[Good Times]

Sean,

talk to your tax man first to figure out what's best for you.

I've got a good collection of corps... C and a S and a bunch of LLC's across multiple state lines... it's not fun come year end...

o btw.... doing business in ca.... not the best place..

[Seanz0rz]

I haven't filed taxes since 03. The perks of having no job!
Yeah cali is a pain, but I'll probably stay here.

[Bob98SR5]

yeah, my further research is basically telling me to set up as a sole proprietorship, a fictitious business name, set up a business bank account, and toss my paperwork towards a friendly CPA come tax time. I am going to go ahead and start using my business name for the business I eventually want to start so I can establish the name and maybe get it out there a bit.

well see. I got a ways to go until I need an LLC. basically once I move from my home office to a store front/shop with employees.

thanks for the help! any other advise?

Sean,

Been down this road, so I'll give you the skinny from what my feeble old mind recalls tonight:

Sole proprietorship - provides your business w/ legitimacy and ability to purchase materials for resale, but WILL NOT provide you with legal protection like an LLC, S or a C Corp will. You will be taxed only once (unlike C Corp which will be taxed at corp and personal level on income). If you sold me some shit, defrauded me, etc., I can go after your business and YOU personally.

The state charges you about $800 for starters to open an C corp. Might be more now. Not sure about S or LLC. But you pay nearly a grand to get started for starters. F##k the state. Ridiculous.

The nice thing of course is that you can write off legitimate travel and other expenses. So if you start fabbing stuff, you can write off stuff like materials, tools, computer software, laptop, etc. Anything basically that you buy that contributes to the production or sale of your goods, but don't be stupid b/c its easy to be stupid. Also, if you go to a big off roading event and set up a tent for selling merchandise, you can write off the gas to get there, the booth costs, the gas to get back, etc.

The Small Bus Administration and the Franchise Tax Board has a lot of good info on their websites.

[Erich_870]

Sean,

I looked into doing the same thing. I'd go with an LLC if you're putting anything out there that can follow you. I have a friend who washes windows in town. He does most of the big buildings. He's a sole proprietor because it's just him and if something happened it would be a single incident so his insurance would cover it. When you make or design something, that liability follows you. Protecting your personal assets is important which is where the LLC comes in.

Look at the Small Biz Admin like Bob said and also check out SCORE. We're too small to have a chapter in town, or else I'd be all over it.

Erich