Just add water: architecture startups!


2 Legit, 2 Quit
October 16, 2012, 4:41 pm
Filed under: Startup

You’ve got a name and a project, now you’re 2Legit, 2 Quit.

In the process of setting up an office, I’ve been dealing with the legalities of a bizness. The options under consideration are:

SOLE PROPRIETOR: you own nothing and you’re flexible. you’re thinking if they sue me they’re not really going to get anything anyhow. So sue me.

LIMITED LIABILITY COMPANY: you’re considered a pass-through entity

Disregard Entity: basically a sole proprietor from a tax perspective, but with the LLC title

S Corporation:entity level income and loss passes through to the members

C Corporation:taxation of the entity’s income prior to any dividends or distributions to the members and then taxation of the dividends or distributions once received as income by the members

After reading a bunch online, I still feel like the best thing to do is consult a tax accountant or lawyer to understand the implications of each…Not just understanding its parameters now but in the future (short term: what’s involved come April when Uncle Sam comes knocking? What forms are necessary for filing?   longer term: if you’re interested in collaborations and a looser associations what is its impact?  Dismantling a corporation should you elect to return to the working for someone else?) What are the considerations or issues that you’ve weighed on?

Here’s a good read: 
http://books.google.ca/books/about/Law_for_Architects.html?id=G7V6i3RGa_YC&redir_esc=y

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1 Comment so far
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This link gives information of LLC vs S.Corp.
http://www.sba.gov/community/blogs/community-blogs/business-law-advisor/should-my-company-be-llc-s-corp-or-both

I just had a very dry conversation with my accountant who I’m convinced might only know about 10 sentences that he uses on auto-repeat. In any case, he has strongly suggested creating a LLC or S.Corp almost immediately at the time of starting an office. Most people I know might be timid to do this but its fairly inexpensive (he quoted me $325; on brief look online you can find the forms from your local state dept and its fairly easy to do yourself if you’re in the DIY mode) to set this up. Aside from the benefits of limiting your liability exposure with your personal assets, it comes with immediate tax benefits. It reduces the “self-employment” tax and while its more expensive for your accountant to file taxes (under an entity instead of sole proprietor) it will save you greatly in overall taxes.

Comment by sml




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