Made the mistake and tried to get info from the IRS

[scrub]

Man, I thought GW was making easier to start up a small business. He must have meant an oil refinery or something. Anyway I made a call to the IRS and waited 10 minutes to get a real person. I then inquired about LLCs, turns out the Fed Gubment doesn't recognize them anymore. In addition, depending on how the local judges ruled in the past will determine whether the court recognizes the state defined unlimited liability LLC or the Federal designation either Corp (S,C) or Sole Prop. The problem is with the latter, if the court rules you run a sole Prop then you lose unlimited liability. Probably not a big deal.

2nd bad news tons of forms, schedules, calculations, estimate,... How is this a more graded and streamlined approach to help me start a small business?

I was planning on doing the mobile thing and skip the shop concept, but now I might just close up shop instead. I guess I could pay an accountant but my total sales probably wouldn't cover all the costs of that.

I even asked "Explain it to me like I'm a 4 year old, how can I wash a car for someone for money while not getting in trouble with you (IRS) aside from not telling you?"

More forms, calculations, estimates.... Just had to rant. Gotta run be here's a start! How'd you pro types cut through this mess?

Thanks

[travisdecpn]

Before giving up on the idea, you may want to have a consultation session with a business law attorney. They may charge a fee, but they will be able to get you all set up as either a limited liablility corp, or a "S" corp. Good luck

[scrub]

Thanks for replies. I had limited time before so heres some more dirt.

The LLC is recongized by the state as a business entity. The Fed government doesn't recognize the LLC. You can either file as a Corp or Sole Prop. How you choose to file with the Feds can determine your liability status. For example if I choose an LLC at the state and a Sole Prop at the Fed and get taken to court the judge will have conflicting business entities. Depending on how that court has ruled in the past Pro LLC or Pro S.P. can affect your status and liability. I'm not sure how this works with state courts since the state recognizes the state approved LLC. I'm sure some minor carwash litigation won't go to the Fed level where the laibility issue could hurt you.

Of course this is info passed on from the 1-800 IRS number. The IRS rep was talking in some weird variation of english I couldn't keep up with. Form number, schedule numbers and what not. I guess I will go talk to an attorney.

It's still not real easy to start a business. I'm going to call an accountant I spoke with a few weeks ago and ask if he offers a you handle all the paperwork and I'll wash the cars service. It will cost me I'm sure but I think I can learn what's going on.

Oh yea I forgot to mention Self Employment tax, estimated tax, and how to calculate both. I want to do this thing right way but too many hurddles.

Any more thoughts or should I just quit whining and handle it? To steal a line from Jimmy Buffit's sig "If it was easy, everybody'd being doing it"

[MichaelM]

I think it'd be a good idea to spend some time on the IRS website, www.irs.gov. They have there everything you need to know.

Here is a link to a PDF file that they put together, "Tax issues for LLC's"

http://www.irs.gov/pub/irs-pdf/p3402.pdf

[Bill Prentice]

LLC's etc

An LLC like any legal entity when faced with a govermental or court challenge usually has a basic test. Is the legal entity really just an alter ego.

If a corporation is used by a single individual and there are no other individuals involved, a court or govermental challenge in many cases may view the corporation as an alter ego of the individual and won't respect the "corporate vale"... This is the same for LLC's, Limited Partnership's and in some cases Living Trusts... Meaning they just see it as an individual doing buisness with all of the personal liability in place using the corporation or LLC as a means for liability protection.

In matters like these it is good to get legal advice so that when your done your company structure can past the test of being a legal entity and not just an alter ego for individual protection aginst creditors or liability. It would be a shame to do all of that work and expense setting up a corporation or LLC and end up holding the bag anyway.

My 2 cents.

[AZScooter]

This is why you pay the money for a good accountant and attorney's. They are supposed to know this styuff, and all of the in's and outs that you will have ZERO chance of finding out. Time not to be cheap.

[scrub]

Thanks for all the help!

MichaelM

I saw that too. That was some good info.

Originally posted by AZScooter
This is why you pay the money for a good accountant and attorney's. They are supposed to know this styuff, and all of the in's and outs that you will have ZERO chance of finding out. Time not to be cheap.

Thanks for your reply! I was really trying get things rolling on my own. I was thinking how hard could this be? I mean I prepare my own taxes on the computer. I figured I'd just answer some questions in the tax prep software interview and BAM be done.

I'm sure someone has enough knowledge of tax and business law to get started without attorneys and accountants. I figured how hard could it be. I mean look at all the small businesses out there. If they can do it so can I.

Then the harsh realization set in that probably most business owners use accountants. And its OK to go that route and not feel like I failed. I felt like how can I run a business if I can't get it started. So its OK to get professional help?? Not that kind, I meant business help!

Thanks again for the help.

As a side note when I got home from work today (before I saw the new replies) I threw in the towel and called my prospective accountant and ran all this past him. I worked it out with him to help me get started.

[Jimmy Buffit]

I've had several businesses in the past, in 3 different states (both LLC and Sub S).

All of the entities involved serving alcohol, so liability was a substantial issue.

Now, in my new incarnation, I find my sole prorietorship to be a fine vehicle. Oh, I still need my CPA, AND attorney, but this time around, I rely more heavily on my insurance coverage.

Frankly, just how much exposure/risk do you foresee? As a mobile operator, you'll not be operating many client vehicles.

A proper Garageowner's Policy will insure against specific incidents, and an umbrella amount of $1 million (or more) should insulate your personal assets, IMHO.

Listen closely to your trinity of advisors, and remember that we're just cleaning cars...

Good Luck!

Jim

[Scottwax]

Like Jim, I set up as a sole proprietorship. Much easier to get started and overall, less paperwork and hassle. If I were to add employees on a full time basis, I'd consider a sub S to reduce my liability.

BTW, here in Texas it was easy to start my business under state law. All it took was $6 for a DBA certificate.

[scrub]

Thanks for help. In the county I live we don't have to register businesses. In the state if a carwash discharges less that 1500 gallons of water per day you don't need any special waste water permits. What I'm getting at is our laws are pretty carwash friendly here.

I'm going to do the sole prop. Is obtaining a city business license the same as a DBA cert??

[Blue S2]

My business is an LLC. Basically, the Federal Government views you as either a partnership, or a Corporation depending how you elect to pay taxes. If you choose Corp., you function just like a C for tax purposes. If you stick with partnership rules, you must distribute profits, etc... via K1 and dont have to deal with the extra corporation paperwork.

With either choice, you STILL have limited liability, depending on how you conduct business.

Each state has different laws regarding an LLC. You DO NOT have to start your LLC in YOUR state. You can set them up in any state regardless where you work from to take advantage of various state tax and business laws.

I am not a licensed attorney, so i cannot GIVE advice, so i talk from experience only. I would either consult someone, or look into some of those books published by Nolo.