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Author Topic: Reorganizing into an LLC... anyone done it lately?  (Read 4028 times)

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« on: March 25, 2014, 17:43 »
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My tax guy recommended that I organize my stock photo and video accounts into a single member LLC.  So I registered one, got the EIN, opened a checking and 2nd paypal (business) account. 

I'm beginning the process of changing 15 microstock agency accounts.  Has anyone done this recently?  If so was it easy or were there issues?

Thanks


lisafx

« Reply #1 on: March 25, 2014, 22:57 »
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A few years back I organized my stock business into an S-Corp.  A bit different than an LLC, so I can't respond to all the issues, because I don't know the difference. 

I did end up filing new W9s with each agency, changing to my corporate name, and giving them my corporate tax id instead of my social.  It was an easy process and all the sites were fairly quick about making the changes. 

One experience I did have in incorporating is that the state revenue dept. (Florida) did an audit of me the first year in business and charged me use tax on everything I had purchased online and not paid sales tax on, for the last 5 years (since long before I opened the business) that I later ended up using in the business - printers, camera gear, computer equipment, things I later used as props, etc.  I ended up having to pay over 2k in back use taxes.  Also had to register to pay use taxes quarterly going forward. Apparently these audits are something they routinely do with newly registered corporations. Fun. 

This was something my accountant did NOT discuss with me prior to incorporating.  I would suggest checking into what your state laws are regarding use taxes, and be prepared if you are audited. 

Hopefully your state is less punitive on new corporations, and also maybe the differences between an LLC and an S-Corp will prove to make it worthwhile. 

FWIW, I unincorporated two years ago because the aggravation was more than relatively small tax savings were worth to me. 

« Reply #2 on: March 26, 2014, 00:47 »
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Why not just a sole proprietorship? I am closing my corporation after 32 years for a lot of reasons. Mostly to save money and simplify my life. Unless you have liability concerns, why incorporate -- and the corporate vail can be broken.

« Reply #3 on: March 26, 2014, 01:30 »
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Why not just a sole proprietorship? I am closing my corporation after 32 years for a lot of reasons. Mostly to save money and simplify my life. Unless you have liability concerns, why incorporate -- and the corporate vail can be broken.

Their can be be liability issues going with a sole proprietorship. My main income comes from property rental and every single piece of property is its own corporation.

« Reply #4 on: March 26, 2014, 07:34 »
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Why not just a sole proprietorship? I am closing my corporation after 32 years for a lot of reasons. Mostly to save money and simplify my life. Unless you have liability concerns, why incorporate -- and the corporate vail can be broken.

My tax guy says an LLC provides a measure of liability protection... but it's far from perfect.  He also says the LLC can open a 401k for itself allowing me to defer a portion of my royalty income... and pay those taxes latter. 

Eventually I see myself picking up a photographer insurance policy and trying more ambitious shoots with models, locations, etc.,.  Organizing into a LLC is partially with a view towards those plans.   

Batman

« Reply #5 on: March 26, 2014, 08:39 »
+1
Why not just a sole proprietorship? I am closing my corporation after 32 years for a lot of reasons. Mostly to save money and simplify my life. Unless you have liability concerns, why incorporate -- and the corporate vail can be broken.

Everybody different but I like your way. I'm a SP have a Roth IRA and it's not complicated. Everbody must get their own best way. I have EIN.

« Reply #6 on: March 26, 2014, 08:50 »
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Liability protection from an LLC isn't really very strong either.  My tax accountant told me it wasn't worth it in my case since my income from photography is modest.

He said the only real liability protection is a good insurance policy.  I carry a $1 million liability policy on my photography business which isn't really too expensive.

I do have an LLC for another business but that one generates more income (and I have a separate liability policy for it as well).

EmberMike

« Reply #7 on: March 26, 2014, 11:37 »
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I'm staying as a Sole Proprietor. Just don't see the need for anything more. You can still get an EIN as an individual, so you don't have to use your personal SSN.

I guess an LLC provides some liability protection but I'm not sure from what for the kind of work we do. If a buyer is going to sue anyone, it would likely be an agency and not one of us. An agency could then sue an artist if the damages exceeded what the agency is willing to cover, but it all seems pretty unlikely. Microstock has been around for over a decade. In that time, has any photographer or artist been sued by an agency or buyer?

lisafx

« Reply #8 on: March 26, 2014, 15:35 »
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Why not just a sole proprietorship? I am closing my corporation after 32 years for a lot of reasons. Mostly to save money and simplify my life. Unless you have liability concerns, why incorporate -- and the corporate vail can be broken.

Absolutely.  Returning to a sole proprietor was the best thing I ever did for my stress level and work load. And the tax savings for a corporation weren't significant at my income level.

As far as 401k, I opened an IRA that provided tax deferment benefits.  Isn't the main benefit of a 401k over an IRA that your employer pays part of it?  If you are the employer it's all the same money. 

Maybe a tax expert can correct me if I am misunderstanding. 

« Reply #9 on: March 26, 2014, 15:48 »
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Why not just a sole proprietorship? I am closing my corporation after 32 years for a lot of reasons. Mostly to save money and simplify my life. Unless you have liability concerns, why incorporate -- and the corporate vail can be broken.

Absolutely.  Returning to a sole proprietor was the best thing I ever did for my stress level and work load. And the tax savings for a corporation weren't significant at my income level.

As far as 401k, I opened an IRA that provided tax deferment benefits.  Isn't the main benefit of a 401k over an IRA that your employer pays part of it?  If you are the employer it's all the same money. 

Maybe a tax expert can correct me if I am misunderstanding.

You can put more into a 401k than an IRA, if you have it, from the "employee deferment" to the "company match".  Honestly, it's all very hard to keep track of.  I've got a company that manages the 401k for a yearly fee, and they've "discovered" an error from a few years back that I now have to pay for.

« Reply #10 on: March 29, 2014, 23:33 »
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I became an LLC last year after a threat of a significant $30K lawsuit over a copyright infringement. (later settled for only the loss of income earned from the photo, which was still many hundreds of dollars).  I simply did not want the personal liability possibly out there with nearly 7000 files for sale.  Many people do the LLC paperwork themselves but I had an attorney do it so nothing would be missed.  Cost a few hundred dollars.
In case you wonder, yes, it places all potential liability on only the assets of the LLC.

« Reply #11 on: March 30, 2014, 00:48 »
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Mark me as another one that went from sole proprietorship to a Corp Sub Chapter S and back again. By the time I got done with all of the accounting bills and Quickbooks it just was not worth it. While moving back to a SP I got rid of my accountant and Quickbooks and am doing everything with iBank and Turbotax.

« Reply #12 on: March 30, 2014, 05:34 »
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In case you wonder, yes, it places all potential liability on only the assets of the LLC.
Forming an LLC does not shield you from liability for your personal negligence that causes harm to someone.

« Reply #13 on: March 30, 2014, 21:03 »
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In case you wonder, yes, it places all potential liability on only the assets of the LLC.
Forming an LLC does not shield you from liability for your personal negligence that causes harm to someone.

I am not sure what you mean by harm, but my attorney assures me personal assets are no longer at risk where copyright infringement suits are involved concerning any photo I have placed for sale.  I could only lose the equipment the LLC owns and  money currently in the account associated with the LLC.  Thus the LLC account is simply a pass through account, leaving only a fairly small amount in at any one time.  the attorney I used specializes in business law of this sort, so I feel protected.

« Reply #14 on: March 31, 2014, 05:43 »
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An example of what I meant is if you placed equipment in a place where it was a tripping hazard and someone was injured you could be personally liable.   The LLC may protect you personally from copyright claims if the LLC owns the disputed image and is registered as the owner with agencies selling it.
ETA: I may have misread your statement that forming an LLC places all potential liability on the LLC. If limited to copyright or contract issues I don't disagree.
« Last Edit: March 31, 2014, 06:10 by rckirk »


 

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