<googlant[at]gmail.com> wrote:

- quote -

All your questions can be best answered by a tax accountant
(CPA or EA). If you do nothing, then you are each sole
proprietors -- not a bad choice for many people. Some
alternatives are incorporating, or forming a partnership.
Whichever way you choose to do it, there are advantages to
be had in that retirement plans and health plans can be
pre-tax. Some other decisions to be made are whether you
need to obtain business licenses, and whether you want to
operate under a fictitious name.

But I'm curious why you believe "opening up a company"
(which is something you've already done, by being
independent contractors) would make getting loans easier.

Steve

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My first advice is to get yourselves to the nearest SBDC for
some low cost and free advice. There are 2 of them in Orange
County.

Orange County SBDC at Rancho Santiage College
Michael Roessler
Director
2323 North Broadway, Suite 201
Santa Ana, CA 92706
Phone: (714) 564-5200
Fax: (714) 647-1168
Email: roessler_michael[at]rsccd.org
Website: http://www.ocsbdc.com

There is another one at UC, Irvine.

Next, get yourselves some real bookkeeping software like
QuickBooks, or Peachtree if you are using Quicken or a
simple recordkeeping system. You will need debits and
credits for a business entity if only for your own
information.

You will probably end up setting up a C Corporation since,
if you are currently making a profit, you can get more money
out of a C Corp tax free than you can from an S Corp.

You will both become employees of the corporation drawing a
salary based on hourly rates. You will pay payroll taxes
just like an employer not related to you. Intuit has a very
flexible payroll service that offers various levels of
support, all the way from do it yourself to full service.

Treat the company as if it were somebody else, not your
other back pocket. If you put money into it, that's a loan
that must bear interest and be repaid. Same if you take
money out in other than wages, dividends or reimbursed
expenses.

I work with the SBDC in Hawthorne which is affiliated with
El Camino College. Their courses are great for beginning
business folks, and they offer customized consulting.

Linda Dorfmont E.A., CFP, CSA

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"googlant[at]gmail.com" <googlant[at]gmail.com> wrote:

- quote -

These questions require a lot more information (about your
situation); so I would recommend that you contact a tax and
business pro in your area to get the best situation for
yourselves. As independent contractors you already have
companies; they just happen to be proprietorships. The
question really is whether a different form of business
makes more sense for you. The common choices are: general
partnership, LLC, S corporation, and C corporation. All of
these except single-member LLCs have additional federal
filing requirements, and all of them have Franchise Tax
board requirements.

--
Tom Healy, CPA
Boulder, CO
Web: http://www.tomhealycpa.com

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<googlant[at]gmail.com> wrote:

- quote -

This is both a tax question and a legal question. The
answers to these questions will rest on a lot of factors:
Type of business activity, expected income and expenses,
other sources of income you might have, what kind of
business liability concerns you might have, and many more
factors. Best bet would be to start with an hour of time
with a local CPA or Enrolled Agent -- you can discuss where
to go from there.

- quote -

Again, I hate to be vague, but it really depends on what you
are doing, and a lot of other factors. Actually, it can be
done inexpensively -- and for not much more, it can be done
right! : ) Time? It can be set up tomorrow.

- quote -

Talk to someone there. There are differences for
partnerships, various types of corporations, and LLC's. It
will depend on income level, type of business, and some
personal factors.

- quote -

No, I don't know anyone in that part of CA. But try this:
If you know someone else with a successful business, ask
them who they use, and whether they could really recommend
them. Don't know such a person? Find a local business
person with a business similar in size to yours, and try
chatting them up (at a not so busy moment). Try that a few
times, and you will have a short list of recommendations.
(And some might even share a business tip or two, unless
you're opening the same kind of store across the street or
something.

Good luck with it!
Bryan
------------------------ Bryan Kellar, EA
Oregon Tax Help, Inc. -- Portland, Oregon
www.oregontaxhelp.com
www.canadatax.org

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I'd recommend the business shelf at the bookstore,
because the answers would be rather long.
Theres books on consulting and free-lancing
that answer these questions. I belive there are
some specifically for California.

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googlant[at]gmail.com wrote:

- quote -

These are actually huge questions, and require a lot more
information. You should really consult a local professional
who can give you a better answer after he has a chance to
ask you the right questions.

I'll try to deal with them briefly, however.

- quote -

It really depends on your specific finances and the reason
you want to have a "company." If you are talking about
looking more like regular employees, a corporation or an LLC
might suffice. If you are talking about things like
tax-deductible benefits, again a corporation or LLC might be
best.

- quote -

The two of you can have a "company" by simply filing a
fictitious name statement, which could cost only $50. Call
your local newspaper for details. It's then a sole
proprietorship or general partnership. Between a husband and
wife no additional paperwork may be needed, but that doesn't
mean it wouldn't be a good idea to have a partnership
agreement.

A corporation or LLC are more complicated. There is
bureaucracy involved (appointing directors, meetings with
minutes for shareholders and directors...) California also
imposes an $800 annual minimum tax on these entities,
whether they make money or not. Many people use lawyers to
help create these entities. Costs in California are
generally $500 to $1500.

- quote -

Depends on the entity you use. If a proprietorship or
partnership, your taxes will likely not change. If you use
a corporation or LLC taxed as a corporation, you may be able
to save a little on taxes, but some of your other ongoing
expenses (e.g. attorneys fees, additional bookkeeping costs)
may go up.

- quote -

First sit down with your tax professional to figure out
which (if any) business entity would be best for you. Then
talk to a business lawyer about the best way to set it up.

Stu

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ooglant[at]gmail.com wrote:

- quote -

I am a consultant who used to operate as a Sole Proprietor,
which is how I assume you are operating since you have not
established any other form of organization and receive Forms
1099.

One major problem with a Sole Proprietorship is that you
have no protection for your personal assets in case you are
sued by a client. You should consider forming a more formal
entity.

- quote -

Well, that depends upon your personal circumstances and
state law. I formed a C Corporation, even though I am the
only employee. This decision was driven by an unusual family
situation regarding medical expenses and the fact that a C
Corp provided benefits that would not have been available to
me as an S Corporation. Had it not been for these expenses,
I would have formed an S Corp or an LLC.

- quote -

You need to talk to a good CPA and small business lawyer. I
suspect that the process is different in CA than in NY, but
the cost was not very high. Less than $1000 in my case. I
first choose a company name by searching the NY State
Department of State Web site. I could not ye a name that was
already used in NY. After that, it took less than a month to
get the company established.

- quote -

Depends upon your situation. The key issue is to protect
your personal assets, even if the tax situation is a wash.
As a C Corp the company files a separate federal and state
tax return, and that costs about $900 a year. I'm not sure
how an S Corp files.

- quote -

I have no info about California.

--
Vic Roberts
Replace xxx with vdr in e-mail address.

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<googlant[at]gmail.com> wrote

- quote -

Forming a corporation doesn't help in that regard. You'll
be required to submit corporate returns and financials for
any personal loan, and you'll be required to submit
individual tax returns and financials for any business
related loans.

- quote -

All of your questions can be answered with one answer: It
depends.

Your best bet would be to meet with a CPA or EA in your area
that is familiar with start-up businesses, entity selection
and the like. There are many variables that impact the
costs and the benefits, so get some competent advice on all
your options before you do anything.

--
Paul A. Thomas, CPA
Athens, Georgia
taxman at negia.net

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My husband and I are currently both independent contractors
receiving 1099s and we were thinking about opening up a
company so that we will have an easier time getting car and
home loans. We are both new to contracting so we are not
sure what the best setup would be. My questions:

1) What type of company would you suggest us to open?

2) What does opening up a company entail? How much does it
cost? How long does it take?

3) What are the tax implications?

4) What resources would you recommend? Any recommendations
for professionals who would be able to help us? We live in
Orange County, California.

Thank you!

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