Incorporating

[eltee]

I did a search here and read up on what small dealers have done regarding incorporation. Apparently (as of a 2014 post) creating an LLC offers little or no protection of personal assets and requires $800.00 annually to be paid to the state. Some dealers created an "S - Corp." or fully incorporated, even if only a one person business.

What is the current thinking on this and is it a pain to convert all your licenses (FFL, Cal DOJ, Resale, Local, etc) to your "new" name even if only adding LLC or INC to an existing name? I'd dread having to RE-apply for everything so hopefully it is simply forms to facilitate an minor name change.

[OCArmory]

Did mine through a corp. Wish I hadn't the $800 per year plus trying to figure out what the state wants filed. Wasn't worth it.

[taperxz]

Did mine through a corp. Wish I hadn't the $800 per year plus trying to figure out what the state wants filed. Wasn't worth it.

Really? If you do things right you protect your personal assets. What extra filings other than separate taxes and a $25 Sec of State filing of facts? Not to mention protecting your personal credit rating.

I know someone who’s business bellied up and lost his entire life including two homes who was a sole proprietor.

$800 bucks is cheap insurance if you do things right. It’s more than $800 bucks if you make more money.

[Chewy65]

It has been 30 years since I incorporated a small business for a relative. My concern with doing it was that should the corporation fail to maintain certain procedures it was all to easy for a creditor to get at his personal assets.

[taperxz]

It has been 30 years since I incorporated a small business for a relative. My concern with doing it was that should the corporation fail to maintain certain procedures it was all to easy for a creditor to get at his personal assets.

So, lack of due diligence is what breaks the umbrella.

If you don't have the umbrella, a sole propietor has their entire assets exposed including any community property exposure.

Eliminate protection in case it doesn't work?

Same as, "i won't wear a condom because it could break"? Right!

[OCArmory]

If I had a ton of assets that might be a different story. Not being independently wealthy there is not much for them to go after. You have to stay on top of the filings every 2 years? or you get fined happened twice. Plus the $800 per year tax really starts to add up. Ten years uin business that is $8000 flushed down the drain. I carry shop insurance so hopefully that would cover any liability issue

[taperxz]

If I had a ton of assets that might be a different story. Not being independently wealthy there is not much for them to go after. You have to stay on top of the filings every 2 years? or you get fined happened twice. Plus the $800 per year tax really starts to add up. Ten years uin business that is $8000 flushed down the drain. I carry shop insurance so hopefully that would cover any liability issue

Don't forget about tax audits. As a sole proprietor, if you get audited they audit your entire life. Business and personal.

A corp gets audited only for the business and then only adjusts your personal tax liability if needed.

[Chewy65]

So, lack of due diligence is what breaks the umbrella.

If you don't have the umbrella, a sole propietor has their entire assets exposed including any community property exposure.

Eliminate protection in case it doesn't work?

Same as, "i won't wear a condom because it could break"? Right!

That is not what I said. Back then the general rule was that if the business was not run like a true corporation, the corporate entity would be disregarded. It wouldn't cost much to conduct it as a corporation, but that is beyond the scope of this thread. Just one example might be, depending on the law of the state and the bylaws of this corporation, to hold an annual meeting with minutes. Easy peasy, but too many don't follow simple rules.

[taperxz]

That is not what I said. Back then the general rule was that if the business was not run like a true corporation, the corporate entity would be disregarded. It wouldn't cost much to conduct it as a corporation, but that is beyond the scope of this thread. Just one example might be, depending on the law of the state and the bylaws of this corporation, to hold an annual meeting with minutes. Easy peasy, but too many don't follow simple rules.

How do you know people don't follow the rules?

My point is that if i hear someone say its a PITA, they don't know what they're doing or why and have yet to be in a situation where it was in fact better to deal with corporate red tape than not to.

[71MUSTY]

You can buy a lot of insurance for $800 a year. If your personal assets are not huge for example less then 1 million might be better to just buy 2 million of insurance coverage.

I am not a lawyer nor an insurance agent.

[taperxz]

You can buy a lot of insurance for $800 a year. If your personal assets are not huge for example less then 1 million might be better to just buy 2 million of insurance coverage.

I am not a lawyer nor an insurance agent.

In the gun industry??? LOL please show me where i can get liability insurance for $800 per year.

[71MUSTY]

In the gun industry??? LOL please show me where i can get liability insurance for $800 per year.

I guess you misunderstand.

You will need liability insurance either way, incorporated or not.

Since you already are buying liability insurance it's not always that expensive to increase the limits on the policy you are already buying.

And if you don't have a lot of personal assets it can be foolish to form a corporation to protect those non existent assets.

With a corporation, you will also need payroll, record keeping, diligent separation of assets, and additional tax filing. All of witch cost time and money.

[taperxz]

I guess you misunderstand.

You will need liability insurance either way, incorporated or not.

Since you already are buying liability insurance it's not always that expensive to increase the limits on the policy you are already buying.

And if you don't have a lot of personal assets it can be foolish to form a corporation to protect those non existent assets.

With a corporation, you will also need payroll, record keeping, diligent separation of assets, and additional tax filing. All of witch cost time and money.

Additional is actual quite a bit more in this industry. I do all of the above anyway if i was incorporated or not. Diligent separation of assets is still important for a sole proprietor during a tax audit.

[Chewy65]

How do you know people don't follow the rules?

My point is that if i hear someone say its a PITA, they don't know what they're doing or why and have yet to be in a situation where it was in fact better to deal with corporate red tape than not to.

It's called discovery. If an attorney has a significant case against a corporate entity, the attorney will use depositions, subpoenas, interrogatories, and investigators to determine if they will be able to pierce the corporate veil (establish personal liability of the principals behind the corporation). 71Musty understands.

If one has serious concerns about shielding personal assets there are attorneys who specialize in this.

[taperxz]

It's called discovery. If an attorney has a significant case against a corporate entity, the attorney will use depositions, subpoenas, interrogatories, and investigators to determine if they will be able to pierce the corporate veil (establish personal liability of the principals behind the corporation). 71Musty understands.

If one has serious concerns about shielding personal assets there are attorneys who specialize in this.

Ya, well, going into business isn't for everyone. Its not that hard to do it right.