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Anyone else interested in "smaller" business. While I am interested in learning whether my company should become an LLC (currently a sole proprietor), this webcast's example of a profit of $100,000 clearly is not representative of my situation. I am looking at sales of closer to $30,000 with a net profit of only $6,000 :)

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Hi Caitlin,

No need to elect to be an S Corp at that level of profit.  Changing from a sole proprietorship to an LLC will not change your income tax.  The only thing it will do is add liability protection.  This may be well worth the price.  So the issue is not your revenue or income.  The issue is whether you have any potential liability.

John

Thanks John, I appreciate the note. I'll consider it :) and hope for bigger profitability in upcoming years as I expand to do more licensing.
John is correct. If you were sued for any reason by a customer, they could only come after the business assets.  If you own a home or have any other assets, there is risk that they can be awarded.
So if you assets including cash or securities they should be protected. An LLC can very easily help protect yourself. Also, it provides separation from yourself and you business and giving you additional legitimacy.

I hope that helps.

Caitlin Dundon said:
Thanks John, I appreciate the note. I'll consider it :) and hope for bigger profitability in upcoming years as I expand to do more licensing.
Another important aspect if you establish any type of corporation, (including an LLC) is that you make sure you have a separate checking account and never pay personal expenses through the business. If you're sued, the first thing a plaintiff's attorney is going to do is try to pierce the corporate veil. Then they can come after your personal assets.  The easiest way to do that is find personal expenses run through the corporation. That would negate the original reason for setting your business up as a corporation.

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