Business Taxes and Legal Issues

Resources and information on business taxes, legal business structures, and other related issues.

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Old 03-25-2009
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Default License - LLC or Sole Proprietorship
Team:

I'm in Washington state and I've come to a sticky area on how to describe what it is that I'll be doing. I've got a list A-Z and not ONE description even comes close to what service I'll be providing as a VA. I'm going to start with a Sole Proprietorship (due to expense) and then move forward to an LLC when things start ramping up.

So, I have a couple of questions here...

#1: What do I select as a 'description' of the services I'll provide as an SP (office set up was the closest thing I could find but I stopped because it's so far off base from admin services of typing, dictation, newsletters, etc.)
#2: When you start your own business and have a bank account set up and such, how do you 'pay yourself' out of that account? Do you write yourself a check from that account and 'use' what's in there?

I'm a little confused on this aspect of it.

Thanks!

Kathya
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Old 03-26-2009
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Default Re: License - LLC or Sole Proprietorship
Hi Kathya,

I'm new as well and unfortunately don't know the answers to your questions. But, I am excited to hear from others as I had the same question regarding the bank account.
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Old 03-27-2009
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Default Re: License - LLC or Sole Proprietorship
I think I saw on another thread that you already registered your business so I'm assuming you've answered all those questions.

With regards to the business checking...I just transfer money from my business to my personal checking and according to my accountant it's recorded as a 'draw' or 'salary'.
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Old 03-28-2009
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Default Re: License - LLC or Sole Proprietorship
Kimberly,

Thank you for this reply. That is very helpful!
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Old 04-17-2009
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Default Re: License - LLC or Sole Proprietorship
Kathya -

I am not sure if you are still looking for the answer to the salary question...

I am not an accountant so I just want to clarify that first...but I have freelanced a side job before (not as a VA) and had set up a sole proprietorship. I set up a bank account in the name of the sole proprietorship and then would do the same thing Kimberly did (transfered the money from the business account to the personal account). I just had to provide my cpa with the amount the sole proprietorship made each year and he would account for it on a 1099 as income (however taxes still needed to be paid on that income). Since a sole proprietorship is associated with your social security number...I think that is what makes it fairly easy to account for.

Hope this helps.

Kelly
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Old 04-17-2009
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Default Re: License - LLC or Sole Proprietorship
I write checks to myself from my Goddess account and deposit them in my personal account (I keep my accounts in different banks to minimize confusion). The check to me is coded against the owner equity account in QuickBooks (cr checking - db owner equity acct). In reverse, if I put money into Goddess (e.g. when I started Goddess but had no clients), db checking - cr owner equity.
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Old 04-18-2009
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Default Re: License - LLC or Sole Proprietorship
Hi Kathya,

I asked my accountant Q#2 the other day. She said write yourself a check to keep clean accounting of the funds. Remember to not co-mingle your personal funds with your business funds.

Good luck!

Lily Daly
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Old 04-18-2009
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Default Re: License - LLC or Sole Proprietorship
I've had too many bad checks from clients so I only take PayPal now. I opened a 2nd PayPal account just for this. The 1st account I've had for years & it's a personal one. Now I just move money from the 2nd to the 1st to "pay" myself. Works for me & the accountant.
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Old 05-09-2009
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Re: License - LLC or Sole Proprietorship
Great responses from everyone. My goal was to be at SP status for a short period even if that meant I don't get to draw a salary for a bit longer; I'd rather put what ever money towards incorporating to protect personal assets.

Elisabeth Hernandez-Madrigal
Aztlan Dreams Executive Solutions
"Helping your Business be as efficient as you Dream it should be.."
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Old 09-10-2009
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Default Re: License - LLC or Sole Proprietorship
Thanks for asking this question. I recently confided in my parents with this question b/c they work for themselves also. We all have BoA business accounts. With an BoA account, you can write yourself a paycheck and they automatically take out the amount of taxes for you and send you a bi-weekly/monthly/quartally/yearly or however you would like it set up. Now my checks come to me in the mail or I can directly deposit them into my personal checking account either way I will get a pay stub to come with it so that I can document my income and show proof of steady income when I need some type of financing or loan.

Make sure you find out all the advantages that come with having a business account.

I hope this helps!
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Old 11-01-2009
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Default Re: License - LLC or Sole Proprietorship
Very helpful and interesting responses.
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Old 11-01-2009
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Default Re: License - LLC or Sole Proprietorship
I agree with most of th post here, I write myself a check. It simple and worry free so it's for me! I made a rhyme!
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Old 12-02-2009
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Default Re: License - LLC or Sole Proprietorship
In regards to LLC and Sole Proprietorship, what are the average fees for these, and do you set them up on county or state level? Do you need to register as either? I've had Princess House and Avon businesses and also my own business when I was a real estate agent and never did either. Are there advantages to them? Sorry! lol. Totally new to all this and I want to make sure I do it right.
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Old 12-03-2009
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Default Re: License - LLC or Sole Proprietorship
Responding to the fees for the LLC and SP, I'm not sure if they are different by state, however in Ohio... SP $50 and LLC $125. Plus other fees such as if you are using a name other than your name you have that registered (another $50) and possibly a vendor's license $25.

Just like you, I want to make sure I am doing everythiing right from the start.

You might want to check your state's website under small business.

Hope this helps.
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Old 12-03-2009
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Default Re: License - LLC or Sole Proprietorship
LOL! Thanks so much Lynne! I went to the group for Ohio to check out pricing on everyone's sites and saw your welcome aboard post. I had to figure out which post you replied to. lol. Must have been fate! lol. Any advice you can give me for our great state will be greatly appreciated.
Serita
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Old 12-04-2009
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Default Re: License - LLC or Sole Proprietorship
No problem Serita! I know I was thinking this had to be the same person! You may want to check out http://business.ohio.gov/ and click on Business 1st Stop. After answering a few questions, it will put together a Free business information kit. In this you will have all the form necessary to at least be registered and licensed correctly in the state of Ohio. I still have not decided whether or not to form an LLC now.
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Old 12-04-2009
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Default Re: License - LLC or Sole Proprietorship
If you start as a sole proprietorship, I would think you could change to an llc at will. That's how it was in Florida.
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Old 12-04-2009
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Default Re: License - LLC or Sole Proprietorship
Very helpful! Thanks. I went and did that right away.
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Old 12-04-2009
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Default Re: License - LLC or Sole Proprietorship
Oh, yes, that is true about changing to the LLC. I think that is the way that I am leaning.
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Old 12-07-2009
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Default Re: License - LLC or Sole Proprietorship
I agree with the comment about not comingling your funds. You definitely want to have a separate bank account for your business regardless of your business structure. Keep in mind that as a sole proprietor, you pay a lot more in employment taxes. With an S-Corporation or LLC electing to be treated as an S-Corp, you will pay yourself wages as an employee of the company. That portion will be subject to employer & employee taxes, so you want to keep it as low as possible (but reasonable to avoid questions from the IRS). Any additional profit will only be taxed once at your individual tax rate. As far as the logistics of paying yourself, you can just write yourself a check from the business banking account. Just remember to withhold for taxes. If you use bookkeeping software, the process is extremely simple. The software will compute your withholdings automatically.
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