Have any of you guys form a corperation just having a small shop out of you home? I have a business license, resale license and a fed Id now.

Another thought is insurance.

What type and coverage is needed?

Ohio Rod Builders

Canton, Ohio

There may not be any advantage to forming a corporation over a sole proprietorship at this point. I'd consult with a CPA and see what they think about this for someone in your situation.

...............

Good advice from Tom here. Your tax person, or a good CPA is where your answer lies. There is not a lot of risk, as far as a corp. is concerned. But some things just veries due to each person's situation. I own a couple small businesses. ! is a small lure co, of which the rod making is a part.
If you operate as a business, weather out of your home or not, there is a risk where insurance may be needed. It will not be real expensive. Check around with agents who sell business ins. But your home owners will not cover business related, unless it is set up to do so.

Kyle Robinson

If your under 100k in receipts per year and don't need the very small advantages that the Corp. creates. Do it as a Sole Proprietor. If it starts making $$ you can always move it over to any entity that you want.

I operate mine as an LLC on the advice of my accountant. That way if the business crashes and It had any debt I won't be held personally responsible for it. The kicker to that, however, is that at present I don't have any debt for the business and don't ever plan on having any. I used a company online to get the LLC and was very happy with the price and service. If you are interested in that, send me an email at matt@smithandalbury.com and i will give you the details.

Matt Smith
Greensboro, NC

Same - LLC. One nice thing is it seperates your personal finances - as a sole prop. you are the business. So if you get sued, they are suing you because you are the business. It helps afford a bit of protection among other things.

A lot depends on your state laws as well. Some states it's very easy to set up an LLC and can be done for a minimal cost.

-----------------
AD

It's not quite that simple - corporate status does not protect the officers of a corporation from being sued. I know, because I'm suing a corporation right now and it's the officers of that corporation that are in the hot seat. They're personally liable under the law regardless of their corporate status.

Debt is another matter, but I'll leave that for a qualified CPA.

.............

Tom Kirkman Wrote:
-------------------------------------------------------
> Corporate status does not protect the officers of a corporation from being sued.


It surely doesn't. I have been sued a few times AS an officer, once as a major shareholder. The ONLY protection is a bigger, meaner lawyer. You can make arrangements for him/her via liability insurance. The concept is simple, have enough of someone else's money (in this case, an insurance company) on the line, that they handle the situation for you. They will either run off the aggressor OR pay them off ... either way, you keep your toys. My liability protection costs $300/year - much less than the annual filing fees for a Florida corporation or LLC.

I could quote state law, but this isn't a legal forum and just isn't worth getting into.

For corporations, it is very common for majority shareholders and officers to be sued along with the company.
Jim - if you were a shareholder, guessing that was a corporation. Tom - You mentioned corporation and not LLC.

In many states, LLC members are not liable personally and thus not named in suits against the company. As with anything there are "conditions" and every situation is different.

-----------------
AD

Very true, another good reason to ask a good CPA or attorney who deals in corporate law.

................

Has anyone actually seen an instance where a home-based rodbuilder (as a business) was sued? I'm curious as to how it could happen.

I studied for months making sure I know how to handle all of my own business affairs, taxes, etc. before taking the plunge. The way I figured, it would be cheaper to pay a lawyer at the time one was needed, if ever. All local, state and federal officials were surprisingly helpful when I had questions.

Steve

Under todays society who knows what could happen? Every one is so sue happy I`m sure if a rod would break and a piece of graphite flew in the eye it would be worth a good bit of money.

Is it better to pay an attorney thousands to settle a law suit , or a few hundred to an insurance co.?

Ohio Rod Builders

Canton, Ohio

Here is another example. We are toying with the idea of a local rod building club. Not affiliated with any other entity. My wife and I both build and sell rods. We would meet at a local fraternal organization. My insurance agent (with a very good and large national firm) says my Lure Company, a small company, which the rod building is a part of, could be liable, if someone ran a rod blank into some else, or if a rod broke. My business ins. would cover. The total cost a year to add this to my other business ins., is about $250.00 per year. I also carry an umbrella liability policy.
There is a lot of variables here. We can see that from the info gathered.
Tom is correct. A person has to contact theirr tax person, accountant, and insurance agent for the correct answer to your own circumstances. This is what everyone has to do, business related.
Too bad we are under some other tax regs. like excise tax rules. As a business, you should be filing these taxes also. It is not hard, but just another hoop to jump through. But once you start to sell your rods, things change.
If you get to the point that you are thinging about doing it as a business, part time, or full time, these are just things you should do.