This is one of those questions that can ONLY be answered firmly by a lawyer or tax specialist (you do have an accountant don’t you?!) But I’ll put my 2 cents in here. 

I believe that ONCE YOU ARE MAKIING A GOOD PROFIT, an Scorp is the best way to go for the following reasons:

 1. It disciplines you to keep company and personal money separate because you HAVE to pay yourself a paycheck and CANNOT commingle funds.

 2. As you make more profit, you get to dictate your paycheck and leave the rest of the profit in the company which simply gets taxed at your rate. For instance, if you are a sole proprietorship, and you make $50,000 profit you have to pay state and fed taxes PLUS social security and Medicare (self employment tax) of 15.3% (you and company side).  If you are an Scorp instead, you pay yourself $30,000 and pay all those taxes on it, then JUST pay state and fed on the remaining $20,000, saving $3,060!! Setting up an Scorp is pretty straight forward.  Here’s a good tutorial here:  http://www.scorporationsexplained.com/scorpexplained-faq.htm

I would say that as long as your GROSS is $100,000 or less and your net before tax profit (including money you pay yourself as wages) is $30,000 or less, you should stay either a sole proprietorship OR LLC.  Consult your lawyer and accountant on these matters first though. 

A couple of points about incorporating:

1.       DON’T buy expensive ledger and  corporate package. It’s only a fancy 3 ring binder and corporate seal.  Google “corporate seal” if you really want one, but my understanding is that they are no longer necessary.

2.        DO spend 50-60 on an incorporating package OR a program like LLC maker because it just simplifies and clarifies everything for you.  IF you are comfortable researching, go ahead, but my advice is that if you can run a business, you can incorporate yourself without a lawyer.  I just bought a “maintenance package” that includes minutes and bylaws to keep everything tidy and legal. 

Help The Lawn Blog grow add us to the Stumble!