Hi,

I am just starting out and a bit confused. When you work from home do you need to form a business entity? I live in NYC and I am not sure where to start.

Hello!

If you are going to conduct ANY type of business, you want to make sure you are legal. My best advice is that you go onto your local City's website and look up the information on starting a business in your area. That should help you out a lot. Also, look at your County's site, too.

Many VAs are a sole prop. (like myself). There are many VAs who took the LLC route for good reasons, as well. There are a few threads that can help you determine what is best for you. Get an icy cold beverage (or hot), sit back, relax, and happy reading!

Originally Posted by MichelleJ

Hello! If you are going to conduct ANY type of business, you want to make sure you are legal. My best advice is that you go onto your local City's website and look up the information on starting a business in your area. That should help you out a lot. Also, look at your County's site, too. Many VAs are a sole prop. (like myself). There are many VAs who took the LLC route for good reasons, as well. There are a few threads that can help you determine what is best for you. Get an icy cold beverage (or hot), sit back, relax, and happy reading!

I have poured over the NY IRS website and it's all still very confusing to me. I called the IRS and was told that I could operate as a contractor with my EIN and work as a sole proprieter. Unfortunately at this time I cannot afford to file as an LLC.

I've been in business for 6 1/2 years and was a sole-proprietor for the first 6+ years. My personal recommendation is to start as a s/p and change if/when your tax/liability issue warrants it.

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Please don't let this comment scare you off from being a sole proprietor.

Typically the only difference between an LLC and Sole Proprietor is the fact that if someone were to sue you then they can come after your personal assets. If that's different in different areas of the country, then please ignore me on this one.

You are taxed the same "i.e. your personal and business taxes, expenses, income, etc. are all filed with your personal taxes - and you just use Schedule C for the tax part of it."

It's really up to each individual business owner on whether they feel it is a risk or not. Also, I could be wrong but I'm sure I saw somewhere on this site - probably under the Legalese forum - that there are states that you can file as a LLC in their state, and it is MUCH cheaper than filing in your own. It might be worth at least checking out that option. In Colorado it was only $50.00 to file as an LLC...so that was well worth it to me.

Pam

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Hi NewYorkVA! I operate as a sole proprietor as well. I agree, while there's a lot of good info on SBA and state websites it can still be overwhelming! It's all general information... whether you're starting a coffeeshop, opening a store, or becoming a VA! Here's everything you need to do to become "legal" as a VA sole proprietor:

• Obtain necessary local business licenses. Check your local requirements by calling your city Clerk or city licensing department. The city may ask, for example, if you will have clients visit your home or if you will have an outdoor sign. (Typical cost = $25)

• Check your state’s license requirements by calling your state’s Small Business Assistance or Secretary of State office. Typically, there is nothing required because your services are not regulated by the state (as opposed to running an in-home daycare, for example). If you choose to operate your business as a “sole proprietor,” you will not need to collect sales tax on your services. Your profits will be taxed at your individual income tax rate. (Typical cost = $0)

• Obtain a tax identification number if you do not want to use your Social Security number on legal paperwork. Use Form SS-4, available through the IRS website at www.irs.gov (Typical cost = $0)

• Register your business name with the state. This lets the state know that you are “doing business as” your assumed name. Find out how by calling your state’s Small Business Assistance office. In some states this is called a “Certificate of Assumed Name.” Be sure to check how long it is valid. (Typical cost = $25)

• You may also want to protect your name against use by others by reserving your corporate name. Just because you have filed your assumed name with the state, your name is not yet protected from use by others. Find out how to do this by calling your state’s Small Business Assistance or Secretary of State office. (Typical cost = $35)

• A notice of your assumed business name may need to be published in a newspaper qualified to print legal notices. Check your state requirements for this. (Typical cost = $25)

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An LLC is always a good idea. Not only does it protect your business finances from personal finances and personal from business, it also provides business credit building options and protection in the event of a law suit.

You can also file as an S-corp and only pay taxes on what you pay yourself. You would have to w-2 yourself and still pay SS and Medicare etc. but it is a much better tax position.

Angie, thanks for posting the detailed information.

Most cities require you to have a business license, my city runs 65.00 a year. I am operating as a sole proprietor for right now.

Most businesses start out as a sole proprietorship and eventually change to an LLC or S-Corp. As mentioned in some of the responses, the IRS website can be overwhelming and confusing unless you have a degree in finance or accounting. You may actually find better (more understandable) information at your local Small Business Development Center or online. There are two main advantages to choosing an S-Corp or LLC: taxes and liability. If you choose an LLC, be sure to elect to be treated as an S-Corp for tax purposes. Otherwise, you may as well stay a sole proprietor since all profits are subject to employment taxes. If you make the LLC-S-Corp election or just choose to be an S-Corp, you will pay yourself a wage or salary as an employee (subject to employment taxes), and any remaining profit will be taxed once at the individual tax rate (no employment taxes). The IRS says that the salary or wage you pay yourself must be reasonable or inline with other professionals in your industry. That said, most people pay themselves as little as they can get away with in wages and take the rest as profit. As far as liability is concerned, both an LLC and S-Corp are separate business entities (unlike a sole p.). Therefore, if a lawsuit occurs, your personal assets can not be touched. It is important that you keep a separate business bank account. If you comingle funds, it could be proved in court that you were actually operating as a sole p., not a separate entity.

Originally Posted by MichelleJ

Hello! Many VAs are a sole prop. (like myself). There are many VAs who took the LLC route for good reasons, as well. There are a few threads that can help you determine what is best for you. Get an icy cold beverage (or hot), sit back, relax, and happy reading!

That's for sure about the icy cold beverage! There is so much information and I'm just trying to wade through it all to jump-start my business. Thanks everyone for all the pointers!

I think it is just a matter of personal choice.....LLC or sole proprietor. I chose LLC to protect personal assets after much research/reading. The cost was only $100 in Georgia.