Independent sales rep should they incorporate ?

by Bobby
(miami,fl usa)

Independent sales rep should they incorporate ?
my wife is a MaryKay consultant and i an independent sales rep for a manufacturing company.Should we incorporate seeing that everything is paid on commission on a 1099 ?
thanks.

Answer

Take a look at the basic reasons to incorporate--protecting your assets and potential tax savings.

I'd say it's a toss-up for your wife--the MaryKay consultant--and that you probably don't need to incorporate.

As a reseller of MaryKay products, if there is, for example, a products liability issue (say the cosmetics injure people), then the resellers could get dragged in.

Having a corporate form would protect your personal assets in that situation.

Only you can decide if the expense is worth it.

Other Questions About Whether An LLC Is Appropriate For Your Business

Question: LLC for Consultant?

You mention in your Veil Piercing section that one of the major downfalls to LLC protection is if you have little to no 'capital' invested in the LLC. If your main business model is Consulting (with little investment capital required), is it common to still obtain an LLC?

--Chris, Ohio

Answer

What is a "little" amount of capital is, of course, relative to the business you're in.

If you are starting a large manufacturing company and hiring hundreds of employees, that's going to require more capital than a consultant who might only have incidental office expenses.


Consultants and other low-overhead service businesses often choose that LLC format for its lower administrative burden than a corporation.

A thousand dollars in capital (with the rest of the startup money for the business in the form of loans from you to the LLC), could be sufficient. This amount could come in the form of, in the case of a consultant, office equipment/computer donated to the LLC for use in the business.



Question: If your company is going to be home-based is an LLC recommended? -- Jackie, Missouri

Answer

Yes, I would recommend the LLC for home-based businesses.

The limited liability company is one of the simplest business entities to operate in terms of administration while still maintaining limited liability protection for your personal assets.

For people working from home, forming a single member LLC with yourself as sole member can give you the advantages of incorporation without adding much of an administrative burden.

Corporations--both C and sub-S--require far more ongoing paperwork to maintain than an LLC.

You can create a very streamlined LLC for a home-based business by:

1. Form a single member LLC;
2. Act as your own registered agent;
3. Apply as a disregarded entity with the IRS.

Your ongoing paperwork burden will increase very little from being a sole proprietor.

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Dec 05, 2008
thanks
by: Anonymous

thanks alot very helpful.

Comment from Admin

You're welcome.

One more thing I'll note is that your wife does not have to incorporate to take business expense deductions for her MaryKay business.

Take a look at Turbotax for small business and see how she can reduce taxes by claiming expenses for her business.

The main consideration here is to keep copies of receipts and explain why whatever she purchased is for a business rather than a personal purpose.

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