This is has been just a craptastic week. Anyway, my husband is a contracted Chiropractor for the Navy. When they hired him they told him he had to keep his business name and continue to run it as a corporation. So he did now, nearly two years later, they are telling him that he it's not legal to work for the government as a corporation, that he will have to switch to an LLC or Sole Proprietorship. They told him he has to have it switched by Sept 12th! That's right, they told him Friday that he has to switch over everything in basically four business days, since Monday was a holiday. We are freaking out a little. Can anyone tell me, as far as taxes go which is better? Sole Prop, or LLC? Obviously he is the only employee and we will not be hiring any others. Thanks!
An LLC is better. At least, according to my accountant! : ) So, since he's doing the books, I'm an LLC.
If you are a straight up c corp either will help you tax wise as they are flow through entities so no more double taxation.
The LLC, unlike the sole prop, will afford you some liability protection. It does not give you as much protection as a c corp but is a heck of a lot better than none. I would advise you get an attorney if you haven't already.
Again on the tax side, no difference.
LLC is better for the majority of things because if anything should happen the LLC incurs the expenses and nothing can fall back on your family.
Now, I don't know what kind of deal he has going on outside of the Navy contract, so it might not matter.
An LLC is a better set up for liability reasons than a Sole Prop. He can set things up online fairly simply. The IRS website has the documents you will need. Your state also probably has some documents you will need to complete too.
I doubt it will be completely processed by the 12th deadline but at least you can get the paperwork started.
We have LLC.
The first thing I would do TODAY is talk to your legal and tax counsel to make sure you make changes the proper way so that you do not incur any taxes or fines. You might pay a fee for the help but that is far better than not knowing what you are doing and being guided by someone who may not know all the rules.
We are the only employees at this point with our compnay. Make sure you get good help with your accounting. There are reports to file quarterly, payroll taxes to be paid monthly and a lot of paperwork to keep things going smoothly. I act as CFO of our company and I have a Quickbooks expert, tax accountant and legal counsel who I call and/or email with questions. I don't take chances with the IRS and our financials. It is done correctly.
Good luck.
