What's Your Buisness? Llc, S Corp, Nothing?

Business By love2frost Updated 7 Oct 2009 , 1:10am by love2frost

love2frost Posted 3 Oct 2009 , 8:15pm
post #1 of 10

I'm a small buisness that I run from my home. I've had the department of agriculture come in and inspect and certify my home kitchen. I do 1 to 3 cakes a week (only 1 wedding for 2-3 birthday/carved cakes)....not a whole lot and I'm really not looking to expand either. I'm happy with it being small (actually, I wouldn't mind it growing after I get my 4yr old and 2yr old off to school). My question is can I keep operating my buisness as is or should I incorporate it? Right now I believe I'm a sole proprietor with no liability "coverage". I know with the LLC and the S Corp you get limited liabilty but it does not cover you for neglegence so I don't think it would really get me any where....that is as long as I have a good contract. What are your thoughts and what are your buisness's, are they LLC or S Corp (heard there was a tax benefit for the S Corp over the LLC). Thanks for you input!!!

9 replies
CanadianChick Posted 4 Oct 2009 , 8:08am
post #2 of 10

here's the secret your lawyers don't want you to know.

incorporating doesn't protect you at all.

here's the deal. Being incorporated provides limited liability for the shareholders of the corporation. This is to protect people who own shares in a company, but other than being invited to an annual general meeting, have no control over a company. So if Sears is sued, and you own Sears shares, you aren't held personally liable.

HOWEVER...incorporation does not protect directors. Once upon a time it might have, but "piercing the corporate veil" is pretty much routine these days. As the managing mind of the corporation, you can be held PERSONALLY responsible for the decisions of the corporation, which means your PERSONAL assets can be used to satisfy creditors, etc.

Deb_ Posted 4 Oct 2009 , 11:23am
post #3 of 10

I'm an LLC. I am a licensed home baker. You say you have no liability insurance on your business at all?

I too am small....my baking business is only part time for me as I have a full time day job. I only take 3 orders a week max, I simply can't handle more then that.

I definitely suggest that you phone your insurance agent and find out what you need to do to get liability coverage.

momma28 Posted 5 Oct 2009 , 12:37am
post #4 of 10
Quote:
Originally Posted by CanadianChick

here's the secret your lawyers don't want you to know.

incorporating doesn't protect you at all.

here's the deal. Being incorporated provides limited liability for the shareholders of the corporation. This is to protect people who own shares in a company, but other than being invited to an annual general meeting, have no control over a company. So if Sears is sued, and you own Sears shares, you aren't held personally liable.

HOWEVER...incorporation does not protect directors. Once upon a time it might have, but "piercing the corporate veil" is pretty much routine these days. As the managing mind of the corporation, you can be held PERSONALLY responsible for the decisions of the corporation, which means your PERSONAL assets can be used to satisfy creditors, etc.




LLC does protect you and more importantly your personal finances. Your business may go under if you get sued but your not losing your personal home or savings.

I am an llc...wouldnt operate without insurance or being an llc. im too neurotic

watertown Posted 5 Oct 2009 , 12:59am
post #5 of 10
Quote:
Originally Posted by dkelly

I'm an LLC. I am a licensed home baker. You say you have no liability insurance on your business at all?

I too am small....my baking business is only part time for me as I have a full time day job. I only take 3 orders a week max, I simply can't handle more then that.

I definitely suggest that you phone your insurance agent and find out what you need to do to get liability coverage.




Not to change the topic, but how do you become a licensed home baker? I am in CT and have tried searching the state's web site, but found little. I know it is a state-by-state thing, but any direction you could provide would be helpful.

Deb_ Posted 5 Oct 2009 , 1:09am
post #6 of 10
Quote:
Originally Posted by watertown

Quote:
Originally Posted by dkelly

I'm an LLC. I am a licensed home baker. You say you have no liability insurance on your business at all?

I too am small....my baking business is only part time for me as I have a full time day job. I only take 3 orders a week max, I simply can't handle more then that.

I definitely suggest that you phone your insurance agent and find out what you need to do to get liability coverage.



Not to change the topic, but how do you become a licensed home baker? I am in CT and have tried searching the state's web site, but found little. I know it is a state-by-state thing, but any direction you could provide would be helpful.




I'm in MA where it's legal to have a licensed home kitchen. I just checked the "states that license home kitchens" it's a "sticky" in this forum. CT is listed with a ? mark next to it, but here is a link to the site that may have some info for you.

http://www.ct.gov/dcp/lib/dcp/foodstandards_regs/regulations_on_bakeries.doc

I contacted my local Dept of Health and they put me in touch with the right dept that I needed to deal with.

Good luck!

leah_s Posted 5 Oct 2009 , 2:20am
post #7 of 10

I'm an S corp. When I incorporated LLC wasn't approved in my state. We keep very careful records and don't mix personal and biz assets. I also purchase liability insurance for about $250 per year. Incorporating and insurance were both easy and inexpensive. I'm glad I have both.

TheDomesticDiva Posted 5 Oct 2009 , 3:30pm
post #8 of 10
Quote:
Originally Posted by leah_s

I'm an S corp. When I incorporated LLC wasn't approved in my state. We keep very careful records and don't mix personal and biz assets. I also purchase liability insurance for about $250 per year. Incorporating and insurance were both easy and inexpensive. I'm glad I have both.




Leah, what company do you have your liability insurance with if you don't mind me asking?? I have been phoning insurance companies all morning looking for the best rates!!

leah_s Posted 5 Oct 2009 , 9:41pm
post #9 of 10

St. Farm. They have a bakery at home policy!!!

love2frost Posted 7 Oct 2009 , 1:10am
post #10 of 10

Thanks so much for all of your imput! From my research that I found online and attending a seminar the S Corp and LLC only provide limited liability (so you still can be sued on a personal level and buisness level) for certain instances (ie//neglegence) even if you have incorporated. It was sounding like the best option is to have your kitchen certified and to carry insurance. But does that make you "legal"?

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