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Sole Proprietorship or LLC? Im selling from home and want to start off right

post #1 of 24
Thread Starter 

My husband wants us to be protected by an LLC but I was told that since it is just me and relatively small I should be a Sole Proprietorship. Cottage food law states I can sell up to 55k from home. So what do you think I should register as? And how do I become an LLC?

post #2 of 24

Go to your accountant or your lawyer and let them explain the differences to you and let them file the papers with your state.

 

It all depends upon how much assets you have. I wanted my business totally separate from my personal finances and we went with a corporation.

post #3 of 24
How much does an LLC cost in your state? In most cases it is worth the relatively small cost, considering selling food could potentially expose you to significant liability. You'll also need business liability insurance regardless of whether or not you go with an LLC.

Starting an LLC is pretty simple, but if you need more help you can pay a company like Legalzoom to take care of the specifics.
post #4 of 24
Quote:
Originally Posted by amartin1900 View Post
 

My husband wants us to be protected by an LLC but I was told that since it is just me and relatively small I should be a Sole Proprietorship. Cottage food law states I can sell up to 55k from home. So what do you think I should register as? And how do I become an LLC?

Talk to an accountant, they can tell you the difference not only in cost for your state but in requirements for you for each. I decided to go with a sole proprietorship instead of an llc. I have additional insurance through my home owner's policy that protects our assets. I will probably at some point form an llc, but at this time, with the amount of business I do (part time), sole proprietorship was a better fit.

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post #5 of 24
Quote:
Originally Posted by sixinarow View Post

I have additional insurance through my home owner's policy that protects our assets.

FYI, homeowner's insurance policies typically exclude liability from commercial activity.
post #6 of 24
Quote:
Originally Posted by jason_kraft View Post


FYI, homeowner's insurance policies typically exclude liability from commercial activity.

Not mine. :D

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post #7 of 24
Quote:
Originally Posted by sixinarow View Post

Not mine. icon_biggrin.gif

Interesting...who provides your HOI policy, what are the general liability and property loss limits, and how much is your premium? Did you need an additional rider to cover commercial activity, and if not has your insurer confirmed that losses due to commercial activity are covered? This might be a good alternative for separate business coverage.
post #8 of 24

USAA, is our insurance provider. We have an umbrella plan that is offered to USAA members jointly with The Hartford that covers my home based business. There are a bunch of different plans that are pretty easy to get and can be very affordable. My monthly payment, with my USAA discount is $25/mo for $750,000 of coverage. USAA is awesome, but even if you cannot use USAA (for direct family members of veterans) business insurance is easy to get and a lot of times more affordable than paying the LLC filing and reporting fees. OP just needs to check with an accountant and see how much her fees would be. It can be pretty pricey in some areas and not worth the cost of the LLC if she isn't doing a lot of business yet.


Edited by sixinarow - 9/4/13 at 9:53am
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post #9 of 24
Quote:
Originally Posted by sixinarow View Post

USAA, is our insurance provider. We have an umbrella plan that is offered to USAA members jointly with The Hartford that covers my home based business. There are a bunch of different plans that are pretty easy to get and can be very affordable. My monthly payment, with my USAA discount is $25/mo for $500,000 of coverage.

Umbrella insurance is meant to provide coverage over and above existing policies. $300/year is about right for the cost of an umbrella policy, but the umbrella by itself won't do anything if you have a loss that is not covered by the base policy. For example, if you had a business liability policy with $1M in coverage, the separate umbrella policy would provide an additional $500K as long as you also maintain the aforementioned business liability policy. I doubt $300/year pays for a HOI policy that covers commercial activity as well as umbrella coverage.

More info: http://www.sb.thehartford.com/usaa/redesign/USAA/HTML/Umbrella_101.aspx
post #10 of 24
Your right, it's not an umbrella, it is business liability insurance. Wrong name, right coverage. You're wrong about what my rate covers. Yes, the $25/mo is what I pay for my business liability insurance. AGAIN, talk to an accountant to weigh the pros & cons of LLC & sole proprietorship.
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post #11 of 24
Quote:
Originally Posted by sixinarow View Post

Your right, it's not an umbrella, it is business liability insurance. Wrong name, right coverage. Again, talk to an accountant to weigh the pros & cons of LLC & sole proprietorship.

OK...so just to confirm, the policy you are talking about is a business liability insurance policy that's separate from your homeowner's insurance?
post #12 of 24
If you pick an llc do you have to keep it in your business name?
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post #13 of 24
No, Jason, it is under USAA (the bill comes from USAA) that they offer as a partnership through The Hartford at a special rate BECAUSE we have home, auto and life through them. It's a "bundled" policy for lack of a better word. Make sense?
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post #14 of 24
Quote:
Originally Posted by kaylawaylalayla View Post

If you pick an llc do you have to keep it in your business name?

Yes, here is a list of what you have to do start an LLC:
http://www.sba.gov/content/limited-liability-company-llc

And some more general info on running an LLC (note the exceptions to liability protections, especially the part about not separating personal and business affairs):
http://www.nolo.com/legal-encyclopedia/llc-basics-30163.html
post #15 of 24
Quote:
Originally Posted by sixinarow View Post

No, Jason, it is under USAA (the bill comes from USAA) that they offer as a partnership through The Hartford at a special rate BECAUSE we have home, auto and life through them. It's a "bundled" policy for lack of a better word. Make sense?

Yes, I just wanted to clarify if the $300/year premium covers the business liability component of the bundled policy or the entire policy.
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