Saturday, January 26, 2008

Don't let them force you to incorporate!

June --

I have been a designer, illustrator, children's book author for 3 years as a sole proprietor.

A company I've been freelancing with for years has just requested I incorporate so they can write a check to me as a business instead of writing a check to me as an individual.

I've looked into S-corp and LLC, but before I spend the money I was wondering the following:

1. Will the combination of a DBA and an EIN do the same thing as an LLC in terms of my personal information (such as SS# and name) not being disclosed to the company and instead appearing as a business?

2. What are the main advantages/disadvantages of S-corp v. LLC

Cambria from Brooklyn


Hello Cambria,


Yes, a business name and an EIN will not expose your name nor your social security number. It's a terrific way to get around the request of your client. For example checks can be made out to Design Delights, ID# 22-1111111.

You may apply for an instant EIN -- stands for employer identification number -- here.

WARNING!! Do not incorporate.

OK. Now that I've said that I'll review a couple things I've already said on this blog and elsewhere.

An LLC is a Limited Liability company. Note that the “C” means “company” not “corporation.”

Be aware than an LLC is not a Federal tax entity but a legal business structure set up under the laws of each state. Because LLCs are formed under 50 different sets of state law, regulations governing an LLC depend upon the state of organization. The legal treatment of an LLC may vary from state to state. If your business is an LLC it has liability protection similar to that enjoyed by a corporation. You are not personally liable for the debts or liabilities of the LLC. That means a disgruntled supplier could go after your office equipment (a business asset) as payment for a delinquent invoice but could not confiscate your kitchen appliances (personal assets).

The legal entity, LLC, may be set up for tax purposes as a sole proprietorship, a partnership or a corporation.

Go here for my various posts on LLCs.

Be sure to check out the book that can simplify your tax and financial life, and save you money! Self-employed Tax Solutions.


Best,
June

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