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Incorporating…what type?
OK…here’s the skinny. I often hire myself out on small jobs that don’t want to 1099 me. They want to pay a company with a federal ID. And occasionally I get hired as an editor, and they rent my system from me on a weekly rate. And while they have 1099’d me in the past, but now they want a federal ID number and to be dealing with a company. For tax reasons is what they state.
So…since I am mostly hired as a freelance editor, and only occasionally rent out my system….and get only a few standalone jobs…a friend recommended that I don’t fully incorporate, but rather do a DBA…Do Business As. Meaning that I just spend $99 and get a bank account with the company name, and pay a few local fees and a fee to get a federal ID, and BAM, I’m ready to get paid. And I then have my accountant deal with the taxes for that.
OR…
Another friend said that I should set up an S-corp. And this was my original plan, but I am wondering if it really too much for what I do. I know that I would then have to fill out quarterly taxes…keep minutes. I mean…KEEP MINUTES? Of what? The company is ME. Maybe one other person if I land the job of doing post for a small show. The friend who recommended the DBA is the one who has an S-Corp just for himself, and he’s afraid that since he hasn’t kept minutes, his company will be shut down! I’m sure he’s paranoid.
Just looking for the best option here. THinking of using LEGALZOOM.com to set this up. Or should I do like I recommend many many other people to do and take it to a professional and have them do it right?
Thanks guys.
Shane
GETTING ORGANIZED WITH FINAL CUT PRO DVD…don’t miss it.
Read my blog, Little Frog in High Def -
14 Replies
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You might also want to look at an LLC.
You might want to talk to an accountant and a tax lawyer. The benefits of each type of business ownership varies from state to state because of differences in the tax laws, BTW.
Arnie
Post production is not an afterthought!
https://www.arniepix.com/ -
My vote is to talk to a professional.
3.2GHz 8-core, FCP 6.0.4, 10.5.5
Blackmagic Multibridge Eclipse (6.8.1) -
Hey Shane….really surprised you haven’t formed an S-Corp for yourself yet. Most of the fear of starting an S-Corp is that you aren’t sure if this whole career path is going to work out for you, but you have been around for a while, so ’nuff said.
Become an S-Corp. It is just a teenie weenie harder than forming an LLC but with much greater tax advantages….but most important, you can bill clients and they don’t need to issue you 1099’s at the end of the year.
In Wisconsin even LLC’s have to have 1099’s issued to them.
Go for it…in 5 years you will be telling newbies on the COW how easy it was and what a great decision it was.
Rich Rubasch
Tilt Media Inc.
Video Production and Post
Owner/President/Editor/Designer/Animator
https://www.tiltmedia.com -
My best arrangement is an LLC with a corporate “S” status. My point being get a good tax accountant that can inform & educate you to of all this stuff. A website won’t do that for you.
Steve
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Don’t forget that an accountant is going to possibly give you very different advice than an attorney, so it may be worth your time to contact both. Many lawyers will give you an initial hour consultation for free and all have different rates. Shop around for both an accountant and an attorney as both are going to be important to have on your side going forward.
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Scorp, llc, or llc w/ scorp tax status are all fine to give you a corporation as noted by others. No need to do a full C corp. These will give you liability protection, IF and only if you perform the proper documentation and execution of the corporation. Your friend’s corporation isn’t going to be shut down because he hasn’t filed minutes. No one checks for those. However if he is sued and he doesn’t have the proper documentation for his corp, such as minutes, it’s possible the suing attorney has a case that his corp isn’t really valid and the judge may allow them to pierce the corporate vale and extend liability to him personally. However if his previous years minutes just happen to appear and are filed in his binder, assuming they had been lost and are now found, he should be good.
A dba is not a corporation. You can however get a dba from your county, and get a federal employer ID number (EIN) or a taxpayer ID number (TIN) online from the irs in about a day. Whether or not that will satisfy your clients I have no way to know.
https://www.irs.gov/businesses/small/article/0,,id=98350,00.html
https://www.irs.gov/businesses/small/international/article/0,,id=96696,00.htmlThere are tax and legal benefits and caveats to all entity and non-entity business arrangements. It behooves you to study them first, then go talk to a couple professionals about them (cpa and a lawyer) before deciding. I have an S-corp. I went that route so in the future I could use it as a holding corporation for LLCs. You can’t do that in reverse.
In california you’ll pay $800 a year in minimum tax just for having an scorp or llc. You’ll file two tax returns with an scorp (not sure about llc), corporate due 3/15, personal due 4/15. You’ll pay at least $100 in filing fees to set it up. If you pay a lawyer to setup your corp for you, they’ll do it right, but you may pay several hundred to a couple thousand. I paid $1500, which I think was steep. If you’re getting an scorp or llc for liability protection it would be wise to have an attorney set it up for you correctly; at least for your first one. Now that I’ve done it once and I have the documentation to mimic, I do my own minutes following the template from my attorney.
Cory
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Thanks guys. I was leaning towards S-Corp…DBA seems too…dubious. To open to problems.
I’ll definately have a professional deal with this. Accountant and a lawyer. Now to find a lawyer…
Shane
GETTING ORGANIZED WITH FINAL CUT PRO DVD…don’t miss it.
Read my blog, Little Frog in High Def -
There is nothing wrong with a dba. It just is not anything. It’s a ficticious business name. It just allows you or a corp to legally do business under another name. My scorp has a dba, as I’m in two markets doing different types of business with two different business names, but I only want one legal/accounting/tax structure.
I know Michael from San Diego Corporate Law https://www.sdcorporatelaw.com. However if that is too far for you, I’m sure he can refer someone in LA. He is not the person I originally went to for my corp, that was before I met Michael.
Cory
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Shane,
You don’t have to incorporate in your home state. You might want to look at Nevada. They have quite a few advantages, in cost, ease and security. You can check out Delaware too, but Nevada has better privacy and public disclosure laws, that keeps your records out of the hands of spammers and scammers. And Nevada doesn’t have an information sharing agreement with the IRS, for whatever that is worth.
There are companies that can set this up for you, but they overcharge, and it’s something you can do yourself, or at least with minimal assistance. It might even save you from paying state income tax.Scott Sheriff
Director
SST Digital Media
https://www.sstdigitalmedia.com -
[Scott Sheriff] You don’t have to incorporate in your home state. You might want to look at Nevada.
If you incorporate out of state, California will still require you to register as a foreign corporation and you’re still charged the minimum $800/yr franchise tax. Nevada won’t charge you state tax, but now you have two states to file documents with. Many corps are formed in Delaware because they have sophisticated corporation laws. Many corps file in Nevada because they hope to evade taxes/privacy or other issues. There are advantages and disadvantages. I decided to file only in california because what I’m doing with my corp wasn’t sophisticated enough to warrant the advantages of the other states. When I have a larger business and am investing through multiple corporations, I’ll address this again for myself. Research!
Cory
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