Questions concerning business structuring

[cafe55]

Hello everyone!

I'm new to the forum and had some questions concerning business structuring.
I would like to create a foundational online management company to manage any future businesses I create, such as an online classifieds company that I'm presently gearing up for. (also the future businesses would be related to the type of management company I would create.)

My questions would be:

1) Would there be any tax or legal problems with starting this online classifieds as a sole proprietorship, then later making this company an LLC ?

2) Could I create the online management company later, also starting as a sole proprietorship then later making it an LLC ?

3) Would there be any problems with beginning both entities at once as sole proprietorships, then later making both LLC's ?

Last Q: Any helpful advice on beginning these type of online companies?

Thank you for your time and help!

[MakingItNow]

Hello everyone!
My questions would be:

1) Would there be any tax or legal problems with starting this online classifieds as a sole proprietorship, then later making this company an LLC ? No, except liability.

2) Could I create the online management company later, also starting as a sole proprietorship then later making it an LLC ? Yes

3) Would there be any problems with beginning both entities at once as sole proprietorships, then later making both LLC's ? No



I have an assumption of why you are wanting to do this. I considered doing this after getting tired of paying formation fees of an LLC, then having to wind it up. I'm not an accountant nor am I a lawyer, so you may may to schedule a free consultation with a CPA. I did that with my first business and learned a whole lot. Be careful spending money for formalities in the beginning, which I assume you are trying to do. I ended up paying $2500 for a lawyer to set up an agreement and take care of getting us the L.L.C. Then when the business went south we had to pay to unwind the formalities. That was frustrating.

You could always do this: You can go ahead and form the L.L.C. It can be any name you'd like for the Management Company. You can then get a DBA for that L.L.C. and still have the "benefits" of a corporation as long as you aren't breaking the law
.
Ex: Management Company, LLC. DBA "My Trade Name."

[vangogh]

You can definitely start as a sole proprietor and later switch to another business entity like an LLC. You won't run into any tax or legal problems. There are different pros and cons to each entity so while you're a sole proprietor you won't be able to take advantage of any tax benefits of an LLC, but you can always change entities at a later date without issue.

When your a sole proprietor, you're essentially still filing taxes as an individual. The differences are you won't report income from a W2. Instead you'll report it on a 1040 Schedule C, which will include both revenue and expenses. You can have multiple businesses and still be a sole proprietor too. This forum is mine and I also have a design business. When filling out the Schedule C I list income and expenses for both.

Later if create an LLC you'd more likely create one LLC and have both businesses be part of it, though there's no reason they couldn't be separate LLCs. I think having one is probably easier, but I don't have experience to say that for certain. I don't think there's an issue with having both businesses be separate LLCs.

Hope that helps.

[cafe55]

TO: Vangogh
Thank you so much for your information, you've been very helpful. I do have other questions but won't burden you all at once (smile)
Thanks again!
café55

[cafe55]

To: Making it Now
Thank you for your insight on my questions. I've not thought of trying to obtain "free consultations" but will look into this thanks!
Main reason for my thoughts of both businesses to be sole proprietorships in the beginning is for lower start up costs.
Thank you again for your time and input!
cafe55