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Is it worth it to change my company to a LLC

Discussion in 'Business Fundamentals' started by flykelley, Sep 14, 2004.

  1. flykelley

    flykelley 2000 Club Member
    Messages: 2,124

    Ok Guys
    Is it worth the cost and time to go LLC for my company? I have a good amount of asset's that I need to protect. What would the cost be roughly?
    Pros and Con's?

    Thanks Mike
     
  2. plowed

    plowed Senior Member
    Messages: 344

    If you have a lot to protect, then it's a wise decision to go to an LLC. Under an LLC, your personal property is protected. In other words, if you are sued, only the assets of the business are subject, not your personal property, such as your house, etc.

    The cost, depending on where you are, you will have state filing fees and your attorney fees. Overall, it should cost less than $800.00.

    Make sure that if you go this route, that your atty prepares an operating agreement, even if you're the sole member of the LLC.
     
  3. 93CobraCPR

    93CobraCPR Junior Member
    Messages: 22

    What is operating agreement??
     
  4. battags

    battags Member
    Messages: 65

    Definately consider becoming an LLC or a Sub-S Corp. While it won't stop someone from naming you personally in any lawsuit, it is a very worthwile level of protection.

    First step....talk to an attorney. The first "consultation" is free and they can answer a lot of your questions. My wife and I are forming a new LLC for our rental propertys in addition to the lawn business.

    Good luck!

    Brian
     
  5. T-MAN

    T-MAN PlowSite.com Addict
    Messages: 1,363

    Dont kid yourself guys with corporate and LLC "protection from lawsuits". A contractor friend of my mine was named in a lawsuit for wrongful death on his site ( the subcontractor had illegal toxins in his blood tests). Anyway his business "corporation" and him personally were named seperatly in the lawsuit,plus every sub on site that day were named in the suit. Thank guys like John Edwards for things like this. But he will change all that if him and his pal get elected. Oh ya your accounting fee's will be alot higher too.
    Todd
     
    Last edited: Oct 21, 2004
  6. lawnmedic

    lawnmedic Senior Member
    Messages: 703

    LLC did not help an friend of mine. Civil court found that he being the opperator of the truck was liable, along with the LLC.
    LLC now bankrupt, and he still owes over 250,000 after his house was auctioned....
     
  7. DJ Contracting

    DJ Contracting PlowSite.com Addict
    Messages: 1,392

    Llc

    When i changed from a DBA I went to to Corp and an S- Corp The S- Corp ownes all the equipment and leases it to my C- Corp being set up this way if in the event i ever get sued they can only sue the C- Corp which doesn't own any equipment after you can shut down the C- Corp and open with another name and lease the equipment again. Just a thought
     
  8. flykelley

    flykelley 2000 Club Member
    Messages: 2,124

    DJ
    I like that idea,the way people are sue happy any more. I will look into that.
    Thanks Mike
     
  9. Playboy

    Playboy Senior Member
    Messages: 335

    Thats sounds like fraud to me. My mother in laws brother used her as a co signer for his garbage Co. and he wasn't paying his bill so the bank was going after my girls mom for the money. They tried to attach the house but then my mother in laws brother made up one of those Co.s that buys debts and goes after the debtor so now my girls mom was being sued by her brother for the money..... Yep civil fraud because he owns the Co. that was being foreclosed on and now owns the Co. trying to sue the co signer of his first company.
     
  10. Chaser13114

    Chaser13114 Senior Member
    Messages: 103


    Wow Are you from one of the parts of the country where If you divorce your wife is she still your sister? Just kidding, please don't take offense. I was just haveing a little trouble keeping up with your post.
     
  11. JRKRACE

    JRKRACE Senior Member
    Messages: 172

    I have some thoughts about LLC's. I don't think they will protect you in case of a lawsuit. Lawyers automatically look for the money, and if it's not in the LLC, it's going to be in it's owner. The only way for an LLC to work as planned is to keep it separate from anything else. Separate checkbook, ledgers, filings , invoices, everything. Pay gas, repairs, SALARY and taxes, plows, and plowing related expense from it and NOTHING ELSE. This keeps it intact and makes it harder for a lawyer to penentrate. As far as I'm concerned, a 5 million dollar umbrella policy on everything you do is better protection. Yes it costs more, but I think it protects you better. Let the lawyers fight with the insurance co. and their lawyers.
     
  12. battags

    battags Member
    Messages: 65


    If you are going to include salary, you may want to check into forming an S-Corp (Sub-Chapter S Corporation). The problem with that is the difficulty of small business owners in projecting gross sales for upcoming year when setting salary. You can get into a sticky situation if you play it conservatively and say you have a $30k per year salary but have a banner year in the business and make $100k. A "Gift" of $70k is not going to be looked upon kindly by the IRS.

    Best advise.....consult a tax attorney with a business background.

    Brian
     
  13. DJL

    DJL Senior Member
    Messages: 343

    I think JRKRACE has given the best advice about LLC's yet. I've spoken (and paid) both a reputable attorney and reputable accountant to help in choosing the best set up our (brother and I) company. It was decided the best route for protection of assets and taxes (for us at least) was an LLC. With that said, stealing JRKRACE's thunder, BOTH attorney and accountant couldn't stress ENOUGH about keeping business and personal completely separate. They told me whenever we put our names on any company document to make sure we add the official title underneath/next to our names. This will let all customers and/or potential clients know that we are acting in the best interest of our company, NOT personal reasons. Same goes for checks, cash and everything else. Deposit it in a business account, preferably a different bank from your personal one.

    Now, according to the lawyer, this will not stop individuals from naming us personally on a lawsuit. However, with proper document/s shoved up the suing lawyers rear chances are it will not even get to court cause they won't have a case.

    So as far as examples of everyone here telling me there friend of a friends LLC didn't do anything for him in a lawsuit...I believe there must have been more to it. Sorry, not trying to call you a lier, but find it hard to believe. Otherwise, what would be the point of the gov't offering an LLC to companies if it couldn't hold up in the court of law. I think they must not have done something the "right" way or other lawyer found a loophole, i.e. guy made a bunch of cash deposits into his personal account or something. I just don't see it, sorry. What would be the point of forming an LLC?

    According to "From your Own Limited Liability Company, 3rd Edition" written by Anthony Mancuso and published by NOLO, chapter 5 page 2...

    Basically, in my words their are different operating agreements dependent on who/m are running the show. The operating agreement basically states the name of your LLC, date of formation, what was filed to form the LLC and with whom, the purpose of your business, and some other miscellaneous stuff.

    The book I have is less than 50 bucks and came with a CD that contains many fill in the blank forms. Saves a bunch of money when going to the attorney cause they only have to review it rather than write it.

    sorry for the length hope I was a little informative. :waving:
     
  14. lewdo

    lewdo Junior Member
    Messages: 17

    Not sure what the laws are in MI, but in IL, is what much cheaper for me to set up under an S corp. I did considerable amount of research on both LLC and S corp and for a small company I don't see any good reason to go LLC. Your local small business extension office is there for help too.

    As far as suing your personal assets. Under the S corp they can only sue the business. The example above about the subcontractor being intoxicated. If your in an accident or cause an accident and under the influence of drugs or alcohol, doesn't matter what type of business....your going to be screwed....

    My attorney and CPA gave me another bit of useful info. I was going to use my full name for my company and was advised against it. They told me, if an individual can prove he thought he was doing business with you and not your company, you could be liable. Hard to prove, but possible. My company name now does not mention me at all.
     
  15. PremierLand

    PremierLand PlowSite.com Addict
    from detroit
    Messages: 1,572

    Its only $50, but ya gotta go to lansing. No sense in paying 500-600 for a lawyer to do it for ya ;)
     
  16. sonjaab

    sonjaab PlowSite.com Addict
    Messages: 1,425

    GUYS...I have been a NY S Corp for about 20 yrs. If I were to do
    it again a LLC is the way to go !

    Both sheild your personal assets (mostly) and the tax deductions are
    great for both personal and business.

    Lots of good advise in this thread !.......................geo :drinkup:
     
  17. Cutting Edge Kid

    Cutting Edge Kid Senior Member
    Messages: 179

    This is BY FAR one of the best threads I've read on here in a long time! This has a TON of great advice...Thanks to those above!
     
  18. SWC

    SWC Senior Member
    from VA
    Messages: 134

    Is it worth it to change my company to a LLC?

    Hey, I have a question.

    How many of you who are LLCs, have actually been sued for everything you own, and lost?
     
  19. JRKRACE

    JRKRACE Senior Member
    Messages: 172

    I have 4 LLC's and have gotten sued once by a homeowner we did renovations on. After 2 years, a pipe broke due to freezing and they called us.As stated in thier contract, we were not responsible, but I went out and fixed the pipe anyway. The damage it caused was covered under the homeowner's insurance. While the homeowner was OK with us, the insurance company came after us with a vengence. I don't know the details but they went as far as serving me papers PERSONALLY. I had to get my lawyer involved and It worked out in my favor. But it goes to show you that insurance companies can and will sue your dead grandmother if they could. LLC or not. As long as a suit is filed, it is usually settled and the person who sues get some amount of money. As I said before, I would rather have the insurance company fight it out than me hiring a lawyer to do it. And if I have 5 million in terms of liability, so be it.
     
  20. Makndust

    Makndust Senior Member
    Messages: 324

    My wife and I just set up our LLC for our snow removal company. It goes into affect on Jan 1 2005. It cost us about $450 for the attny and fees. My attny explained it as if TNT Snow removal is sued then they can only go after what the business has for assets or cash. I'm going to lease the equiptment to the LLC so that all there is there is a bank account. I don't know if this is all correct, but that is what I am going to try. I was told by my accountant that it is not going to affect my taxes because all the money that is made is ultimatly declared as income for me anyway. (We'll see come tax time). The way I see it, we have to do everything in our power to protect ourselves because no one else will.