My husband wants to start a custom woodwork finishing company. What business structure would you suggest?

Wendy B: My husband wants to start a custom woodwork finishing company. What business structure would you suggest?
He has two contractors who are interested in his work. We were going to do this as a sole proprietorship, but have been advised by some that it isn’t a good idea because we could lose our house, etc if someone were to sue us (God forbid). My husband will be the one and only employee. I will be taking care of the paperwork end, but I’m not going to be an employee. What type of business would you suggest? We were told that a better move would be to make it an LLC.

Answers and Views:

Answer by Tim W
I WOULD GO THE BETTER BUSINESS BUREAU AND GET SOME INFORMATION FROM THEM

Answer by rayt721
For a company the size you are talking you will be better off with a sole proprietorship. Yes, your personal assets are on the line but that’s why business insurance is such an important thing to consider purchasing. You should consult a business accountant and/or attorney for a number of things and the type of structure should be one of the discussions that you have. Start out with consulting the SBA or SCORE for professional advice on start up including business planning, marketing assistance, and other important FREE networking.

Answer by Cedrick
It depends on your State. As a sole, the income you make has an additional tax (self-employment tax). That is the social and medicare we pay as an employee times 2. As a sole you pay the employee and the employer portion. If you start an LLC and file Form 2553 (E-Election) you will be an LLC taxes as an S-Corp. The income will flow through your personal and not subject to that self-employment tax. That is a savings of 15.30% (7.65% x 2). That means on net income of $ 100,000 you saved $ 15,300 in self-employment taxes. As an S-Corp the IRS wants the owner to pay themselves wages as well as employees. The wages don’t have to be much, just a reasonable amount of compensation. As the owner, in additional to the reasonable amount of wages you can take distributions out of your company. The net income is taxed once, therefore the distributions are generally not taxed.