Thank you for taking time to help me with a decision!
Main point: Should I file for an LLC or DBA?
Story behind the question:
I'm currently a college student looking to starting a business. I would be doing wood working projects, selling/renting my projects, and doing mild renovations (under $7500, i.e. bathroom reno) and simple handyman jobs (like repairing fences, yard work, etc..). Since my business would under a 'ficticous name', I'm filing for DBA, but I also looked at filing for a LLC and that's where I got confused.
My biggest concern is taxes and what that would look like for me, a full-time college student, just starting a business.
With an LLC, I get Personal Liability Protection and from what I gathered, it protects me as an individual and keeps the business account separate from my personal bank account. Whereas a DBA, only gives me a title to do business in the name I choose- there's no liability protection with a DBA.
And again, I'm woodworking (making tables, wedding decorations, furniture) and selling/renting them out...and would be doing mild renovations under $7500 every now and then until I get my name more established. If I got a DBA, I would eventually move it to an LLC but I'm asking you if I should just go ahead an get an LLC or stick with a DBA for the work I've described.
Honest feedback welcome,
Thank you again for helping out!
2 Answers from Attorneys
An LLC gives you the liability protection of a corporation, with the tax structure of a DBA. An LLC owned by one person is a "disregarded entity" to the IRS, which means flow-through taxation, just like a DBA. However, with an LLC, your personal assets are never at risk. "Moving" your business from a DBA to an LLC later will not be nearly as clean and simple as you think. If you want an LLC (and it sounds like you do), start the company as an LLC from the outset.
You should set up a proper entity like an LLC. There is little reason not to and in your line of work there are any number of things that might happen that leave you exposed. For example, an injury to someone or damages to property.
If you need clarification, I suggest that you consult with a lawyer in private and discuss your objectives in more detail. You can start by calling around to several for a free phone consultation, get some insights then pick the best fit to work with.
If you would like to discuss further over a free phone consult, feel free to contact me anytime that is convenient.
Our firm is now referred by the American Bar Association (see under the New York section): http://www.americanbar.org/groups/delivery_legal_services/resources/programs_to_help_those_with_moderate_income.html
DISCLAIMER: this is not intended to be specific legal advice and should not be relied upon as such. No attorney-client relationship is formed on the basis of this posting.
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