I would love to know how many Professional Virtual Assistants on this forum began as a sole proprietor when they first launched and how long did it take for you to incorporate, and why?

As I start small, I leaning more toward a sole proprietor. Any thoughts?

Thanks,

I'm a sole prop. Here in Australia if I become a company (Pty Ltd) we have a flat 30% tax rate on the profit for every dollar whereas if I stay a sole proprietor, the tax rate remains at 15 - 25% until I hit about $75,000 per annum. There is also a tax free threshold so while you are underneath the threshold you pay no tax. Perfect for small profits. So for me its a tax thing. For others its a risk and/or liability thing.

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Kylie Short
Tilda Virtual Services - Making virtual personal

I am a single-member LLC, which is taxed as a disregarded entity. Basically that means I do my taxes the same as a sole-p but I have the asset protection of an LLC. I felt it was necessary because I work with finances. However, if you are primarily doing admin work I see nothing wrong with staying a sole-p.

You still need to register your business (trade name) with the state in which you are working, even if you are a a sole-p. Once you have done that you can also register it with the IRS and obtain an EIN number to avoid giving out your SSN to clients.

Sole-p or not I would recommend you have a seperate bank account for your business and run all income and expenses related to the business through that account, you should never co-mingle business and personal funds for audit purposes.

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Rebecka Melson ~ Virtual Business Services

Rebecka - I have a quick question for you re: EIN number. I was told by my newest client's CPA that as a single-member LLC I SHOULDN'T get an EIN number as the IRS can't match up the 1099s to my sched C?!? I had recommended getting one to my client... Any thoughts?

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Lily Chambers, The Virtual Office Goddess, LLC
Author "How to Do Your Own Small Business Bookkeeping"

Thanks All, good information.

I'm going to do more research on that single-member LLC, that sounds interesting. I do plan to obtain an EIN number also, because of the SS# risk and I am in the process of registering my name with my county (we have to publish the legal notice in a weekly newspaper 3 times). I'll have to check the state requirements.

I also plan to get a business license for the sake of a business bank account, although that may not happen soon; for now , I'm looking to open a separate checking account to handle all business finances; Do you think that it would pose a problem/risk because it would be under my name?

Thanks for the useful information!

Originally Posted by Office Goddess

Rebecka - I have a quick question for you re: EIN number. I was told by my newest client's CPA that as a single-member LLC I SHOULDN'T get an EIN number as the IRS can't match up the 1099s to my sched C?!? I had recommended getting one to my client... Any thoughts?

That doesn't make any sense. There is a place to list your EIN number on your schedule C, so why wouldn't they match up?

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Rebecka Melson ~ Virtual Business Services

Originally Posted by Rebecka

That doesn't make any sense. There is a place to list your EIN number on your schedule C, so why wouldn't they match up?

Thanks Rebecka. That's what I thought - weird! I had to submit my SSI when I applied for the EIN so I SHOULD be o.k. Even though I don't have employees, I'm just not comfortable having my SSI "floating around" out there.

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Lily Chambers, The Virtual Office Goddess, LLC
Author "How to Do Your Own Small Business Bookkeeping"

Thanks everyone for the information presented here. I'm also a newbie and am unsure of what business entity to form. Initially I was going to do a sole prop, but after reading this information I'm now leaning toward an llc. I'm meeting with my "mentor" next week, so now I feel, I'll be a little more prepared for the meeting!

Hello everyone,

I'm just starting out, as well, and decided to start my business as a sole proprietor rather than LLC. I figured I could switch over down the line.

I decided to start as a sole-p also and I am going to eventually make the transition to LLC, but no rush. My primary reasons behind switching LLC are tax benefits and I forsee hiring or sub-contracting other VAs. Right now, I am going to be operating as sole-p just because it is only me and being new to this industry, I want to be more established as a business owner before I enlist the services of others.