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LLC or DBA?

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geoLLC or DBA?
by on Nov 4, 2006 at 1:33:39 am

I want to register for a license but don't know what is right for me to choose, DBA or LLC? I'm a freelance and have a ficticious name to register. What are my options. BTW, I'm providing services for editing, web design, and DVD Authoring.

Blu


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Gary ChvatalRe: LLC or DBA?
by on Nov 4, 2006 at 2:35:50 am

Its hard to know whats best without knowing the details of your business and your individual tax status and what you want to accomplish. I planned on creating an LLC but after a half hour discussion with a business savvy attorney he advised me to set up an S-Corp dba as my trade name. Talk with someone who knows and who can help make a decision regarding whats best for you....my 25 cents worth is its a few hundred bucks well spent.


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JNeo25Re: LLC or DBA?
by on Nov 4, 2006 at 12:06:14 pm

In Los Angeles, I received conflicting advice about LLC or S-Corp, however, the S-Corp won favor because it was a better deal for me. The problem with a DBA is that you're still taxed the outrageous rate (51%, right guys?) on ALL untaxed income that you make, after deductions. If you incorporate, you'll want to set yourself up with a payroll company like Paychex (they're in Culver City, but are national). Paychex will take out all taxes and direct deposit however much you want to pay yourself as presidnt/ceo of your company. Whatever is left in the Company account after you're paid is taxable, but you get some great breaks like a 3 percent gross manufacturing deduction because you make a physical product, like DVD's, or tapes. That's sort of a loophole as the deduction was meant for industrial companies, however it applies and is used by lots and lots of California video/dvd production companies.

As a company, you can also write off one vehicle, deduct many trips (always travel with a video camera for your b-roll shoots), rent an office in your home, and it's dealt with before taxes. Clientwise, if you're a company it's easier to get larger budgets. Rather than being day-rate, you can cash in on your production speed and creative expertise by working on a lump-sum basis.

One thing to consider is that it's not completely worthwile to incorporate unless you're making upwards of 100k freelance. There are associated once a year fees ($800) that are involved, you have to file two tax returns, etc, so that can become more of a hassle than it's worth.

Each person is different, so as the other guy stated, it's difficult to give you advice without knowing your exact situation. Search the boards, this topic comes up from time to time.

Since you're in LA, drop me an email and I'll give you the name of my contact at Paychex, and my Tax Preparer (she's the one that set me up with the S-Corp). Both are in LA on the West Side.

Good Luck!
-neo


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Bruce Bennett in Madison, WIRe: LLC or DBA?
by on Nov 4, 2006 at 4:09:10 pm

After working 14 years for Corporate America, I was "downsized" and decided to start my own biz in April of this year. I formed an LLC, and in my opinion is the way to go if you plan on being in biz for yourself as a "sole employee" for a really long time.

I set up as an LLC and filed as an S-Corp (you can do both). LLC gives you the protection of a corporation (i.e., Corp, inc.) and S-Corp filing allows you to take dividens without paying Social Security on them (although the gov wants you to be reasonable when establishing a salary and taking dividends - you can't make up a $10K annual salary and then pay yourself $20K in addtional dividends).

With an LLC, you HAVE to assign yourself a salary and pay yourself that salary - else you're out of biz in the government's eyes. Also, you pay 2x the taxes on your salary - the biz pays federal and Medicare, and you as an employee also pay federal and mediacare - double whammy.

So, now personally, my definition between "owning your own business" and being a "freelancer" has been defined in a whole new light - lit by good old Uncle Sam.

Good Luck!



Bennett Marketing & Media Production, LLC - http://www.bmmp.com


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Tim WilsonRe: LLC or DBA?
by on Nov 4, 2006 at 11:03:56 pm

I had the exact experience that Bruce did, and recommend some kind of incorporation every time I get the chance. (I too did the S corp.)

Don't understimate the value of protection. Say the worst happens and you get sued, hit with a liability claim, or go bankrupt. Far better to attach all this to a corporation that can disappear, rather than have it go on your personal record.

I feel most strongly about Bruce's first point. There's a huge shift in the image you project to the world, and a major confidence boost, to yourself this way:

--I'm not a freelancer, I'm a business owner. (Or principal, president, etc.)
--I don't look for jobs, I take clients.

Even your business cards look more serious.

Sure, you can use this positioning without incorporating (and I recommend in any case), but for me, I felt more motivated, and felt like I swung a bigger bat when it was actually true.

Tim

Tim Wilson
Associate Publisher, Creative COW Magazine
http://www.creativecowmagazine.net

Associate Director, Creative COW Forums
http://www.creativecow.net


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Tim KolbRe: LLC or DBA?
by on Nov 5, 2006 at 6:35:29 pm

OK...I'll supply an alternate viewpoint.

LLC's and LLP's (Limited Liability Company and Partnership) aren't nearly as tested in litigation as formal corporations are...and with the prevailing winds of business misconduct building over the last 15 years to the recent high profile, absurd occurences we've seen of late, jurys have, in increasingly frequent cases, "pierced" the corporate umbrella to assess deeper damages than the "isolated" business entity (usually a C-Corp...even more secure than an S-Corp in this sense) is capable of paying.

The tax burden strategy is certainly valid to the extent you can convert payroll to dividend income...and the Corporation can hang on to capital that you want to spend next year and not pay it through... But in most cases business owners are finding that taking the income and paying the tax and loaning the money back to the corporation for interest is also a good way to build non-payroll income.

(All of this is USA law BTW...your country may vary) However the FICA tax will be paid one way or the other...whether you pay it as a sole proprietor and pay both parts, or you pay half withheld on your paycheck and the corporation pays the other part, the money has to be made and it's money you don't get to keep.

So...you're left with the biggest advantage to organizing under a formal C or S-Corp or LLC or LLP being a liability shield. Since that may or may not work depending on what ends up happening, you increase the chance of the legal barrier staying put if the business is heavily liability insured, so the business has means of making reparations should damage or injury causing legal exposure occur.

...the idea that you can create a separate company, keep it poor, and close it down if bad things happen and keep the Mercedes is becoming less and less true as jurys are staffed with laid off blue collar workers and citizen investors who have lost their life savings to Enron, or WorldCom, or Arthur Anderson...or...

(Just call me Mr. Sunshine.)






TimK,
Director,
Kolb Productions,

Creative Cow Host,
Author/Trainer
http://www.focalpress.com
http://www.classondemand.net


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Bruce Bennett in Madison, WIRe: LLC or DBA?
by on Nov 5, 2006 at 11:10:33 pm

Wow Tim. It seems like you have a lot of knowledge on this topic. It's a little over my head (and the main reason why I hire an accountant), but I hope it helps "geo" in deciding whether to go with LLC or DBA.

One thing that I've learned, it doesn't matter how you classify your business, some companies (usually the ones with big checks) require their vendors to have a $1 million general liability policy no matter what. Plus, I have a couple of clients who do not do business with DBAs just because there is too much risk of the feds considering "non coporates" as "employees of the company" during an audit.

Bruce

Bruce Bennett,
Bennett Marketing & Media Production, LLC - http://www.bmmp.com


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Tim KolbRe: LLC or DBA?
by on Nov 6, 2006 at 2:50:03 pm

[Bruce Bennett in Madison, WI] "Plus, I have a couple of clients who do not do business with DBAs just because there is too much risk of the feds considering "non coporates" as "employees of the company" during an audit."



That's valid.


TimK,
Director,
Kolb Productions,

Creative Cow Host,
Author/Trainer
http://www.focalpress.com
http://www.classondemand.net


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Tim KolbRe: LLC or DBA?
by on Nov 6, 2006 at 2:51:03 pm

Though I forgot to add that 1 million liability is the minimum even worth getting and the insurance is is pretty cheap as far as insurance goes...

TimK,
Director,
Kolb Productions,

Creative Cow Host,
Author/Trainer
http://www.focalpress.com
http://www.classondemand.net


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The Matt HallRe: LLC or DBA?
by on Nov 7, 2006 at 3:45:11 pm

Can someone recommend an insurance company? I'm looking for a million dollar liability policy and coverage for all my gear. I'm a small one man shop (LLC).

Thanks.
Matt


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liv2snorideRe: LLC or DBA?
by on Dec 7, 2006 at 10:06:25 pm

Not sure if they are licensed in NY but I use Beyer Insurance in Chicago.
708-331-5300


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