Want to ask those of you in the t-shirt and apparel printing business -
What business structure does your company use and why did you choose that type of structure?
My business partner and I are planning to speak with a business lawyer soon for insight on what structure we should choose. I am personally leaning towards an S Corp though the LLC option looks enticing.
Thanks for sharing, may give me more food for thought on what will work best for us!
We are a C corp. The C corp allows you to take a lot of non-taxable cash out of the business that the other forms do no. Also, all other forms are flow-through so you cannot control profits being taxed at your personal rate. With a C corp you will be taxed at a potentially much lower rate.
Here are some things you can do with a C corp.
Expense reimbursements for 100% of your non-covered medical
Retirement savings with a potential of more than $100,000 per year
Section 179 depreciation for both the corp and your persoal taxes, worth over $100,000 in deductions per year for each additional entity that can have this.
Ability to have a fiscal year that ends in any month
The ability to retain earnings or profits from year to year
The ability to split your income with the corp to keep yourself out of higher tax brackets
A disadvantage with the LLC is your income (profit) could be all taxable for payroll taxes. The IRS has refused to rule on this.
A disadvantage with an S corp is many S corp owners have abused the ability to pay dividends and not pay payroll taxes on that money so the IRS is more focused on those people. Also, all the income is flow-through so if your make a lot of money in one year you will get a nice income tax bill that you could lower if you were a C corp
A disadvantage with an S corp is many S corp owners have abused the ability to pay dividends and not pay payroll taxes on that money so the IRS is more focused on those people. Also, all the income is flow-through so if your make a lot of money in one year you will get a nice income tax bill that you could lower if you were a C corp
I appreciate you sharing this binki. You pointed out a primary concern of mine with selecting an LLC as our biz structure, as I read just last night that the IRS has not ruled how profits of an LLC will be taxed.
Are you able to elaborate more on your last statement about all income being flow-through and that you can lower the tax bill of a C corp more than an S corp? I was thinking it was the other way around, given that you are not taxed on S corp dividends?
The other question I have is, what potential lawsuits could (and have) come about from selling printed apparel?
Do you know how much it costs to set yourself up as a C corp? Legalzoom i believe charge $300 for LLC. I registered my company name as a LLC, but i have not set myself up as a LLC - so i could edit the name to remove LLC, is this correct?
Do you know how much it costs to set yourself up as a C corp? Legalzoom i believe charge $300 for LLC. I registered my company name as a LLC, but i have not set myself up as a LLC - so i could edit the name to remove LLC, is this correct?
Thanks,
Irene
Hi Bee,
Costs vary for setting up a corp or LLC. I've seen the costs as low as $49 on up to $700 to have a corporation lawyer set it up.
Some people do the setup themselves to avoid costs of a company setting up for them. This is fine if you've done homework enough to know that you're forming a corporation type that's right for your business (and you), know tax implications/burdens, and know other important details in structuring a corp.
You should be able to make a business name change to remove the "LLC" from it since you have not formally established an LLC. There may be a charge with changing your business name with your local city government.
Also, if you've set up an EIN under the name you want to change, you should read this IRS page about how a current EIN may be affected with a name change:
it's always good to have a family friend who also happens to be a lawyer...things are notorized for free!
we are a partnership because, well, we're taking our time starting out (i'm still in school full time until March) and didn't see a need for anything else. we own everything, buy what we need when we need it, etc. but if things pick up and we can begin to do this full time, we very well may change our classification for more protection.
I am setting up a website to sell my shirts, so basically its just me. I'm hoping in the future I might have employees..so as far as which structure to choose..im totally confused. Someone told me I do not need to do anything right now until I have large sums of money coming in..is this true? If so, at what point is that?
If not, since its only me would a sole prop make more sense? Can I eventually incorporate from that once I grow?
I am setting up a website to sell my shirts, so basically its just me. I'm hoping in the future I might have employees..so as far as which structure to choose..im totally confused. Someone told me I do not need to do anything right now until I have large sums of money coming in..is this true? If so, at what point is that?
If not, since its only me would a sole prop make more sense? Can I eventually incorporate from that once I grow?
thanks
This link: Business Structures will help you choose the correct business structure for you. From what I've seen, most small businesses form an LLC.
What's Your Business Structure and Why? 
