Should I create a business?

September 5, 2005 7:04 PM

For a friend, "I run a small computer consulting business on the side in my spare time. I have a bit over two dozen clients and do regular work for a handful of them. My question is, does it make sense to go thru the process of creating a business? What advantages or disadvantages would this give me? How much would it cost? Any other uggestions/ideas/comments/etc.. would be great! Thanks!"
posted by k8t to work & money (5 comments total)

Yes, incorporate. There are pro's and con's to specific types of incorporation, depending on whether you plan on growing the business to more than just you- talk to an accountant about that.

Why do it? Protection for your personal assets if Something Bad happens (e.g. one of your clients loses business because you screwed up their computer- don't think "it'll never happen"). You'll also be eligible, depending on how much you spend, for corporate accounts at places.

Cost? If you do it yourself online- there are tons of places- it's a couple hundred bucks.

You will also have to keep tighter track of your income and expenses, because you'll have to file taxes separately. Depending on your "regular job" income and your "side" business expenses, this may result in lower taxes than if you just added that income to your personal base.
posted by mkultra at 7:21 PM on September 5, 2005

If you create an LLC, it's incredibly easy. Check your Secretary of State's web site - chances are that they have the forms there. In my home state, the filing fee is $105. If you're doing business under another name than your own, then you also have to file a fictitious name registration. The filing fee in my state is $7 for that one. Your mileage may vary.
posted by Ostara at 7:35 PM on September 5, 2005

If you have a friend who's a lawyer, you may even get him to look over your paperwork before you submit it. It saved me a lot of work and heartache when a few friends and I decided to LLC our similar line of work to the guy asking the question above.
posted by thanotopsis at 7:45 PM on September 5, 2005

You can pay someone to do the corporation paperwork for you but it's usually pretty simple. I did it in Florida and now here in Virginia and it was all of two pieces of paper to fill out and mail in. It can be intimidating when faced with the different choices in forms but nothing you can't carefully read over a cup of coffee and understand.

Personally I don't see why individuals doing business go for LLCs anymore rather than S Corporations but there's plenty of writeups out there on the differences and he can make the decision for himself.

On the "is it worth it" question, definately. Being able to write off a plethora of computer purchases and expenses saved me hundreds in taxes when I was consulting on the side.
posted by phearlez at 8:41 AM on September 6, 2005

You can easily write off business expenses without incorporating.
posted by kindall at 9:04 AM on September 6, 2005