Daycare.com Forum

Go Back   Daycare.com Forum > Daycare and Taxes

Daycare and Taxes All things related to Taxes and running a Daycare post here. Topics of tax exemptions, forms, filings, tax write offs, IRS etc.

Reply
 
Thread Tools Display Modes
  #1  
Old 03-10-2011, 08:01 PM
crmommy's Avatar
crmommy crmommy is offline
Daycare.com Member
 
Join Date: Mar 2011
Posts: 3
Post Should I Become An LLC Or Not??

I am at my wits end with conflicting advice from 2 tax people, 2 insurance people and an attorney. I have been doing home daycare for a year now so this is something I probably should have done before...better late than never.
I was told recently by a good friend who also has a home daycare that I should become an LLC because it would seperate my personal property from any liability, basically I couldn't get sued for my house and cars if god forbid something happened and I was in a legal situation.
What is true?
I've heard yes and no and I've heard get more insurance, but how much?? I was told 2 different things about how my taxes would need to be done, that a: nothing changes but my tax id and b: I have to file a seperate return and don't get to deduct nearly as much as I can know..(really don't like that option!!)
Can anyone advise me on what you know and also what you do. I just found this forum tonight searching and will definately be back because it looks like there is so much great information and great people here. Thanks for your help!!

Last edited by crmommy; 03-10-2011 at 08:27 PM. Reason: change title
Reply With Quote
  #2  
Old 03-10-2011, 08:15 PM
daycare's Avatar
daycare daycare is offline
Advanced Daycare.com Moderator
 
Join Date: Feb 2011
Location: Mars
Posts: 16,021
Default

Welcome to the form
I would address this question to tom. He is the tax guru for daycare aka the god father. Lol
Reply With Quote
  #3  
Old 03-10-2011, 08:24 PM
crmommy's Avatar
crmommy crmommy is offline
Daycare.com Member
 
Join Date: Mar 2011
Posts: 3
Default

I know, I actually have one of his books in front of me. Obviously not the book that helps me with this though...I'll adjust my title I guess for him to see??Thanks!!
Reply With Quote
  #4  
Old 03-11-2011, 12:03 PM
TomCopeland's Avatar
TomCopeland TomCopeland is online now
Business Author/Trainer
 
Join Date: Jun 2010
Location: St. Paul, Minnesota
Posts: 2,789
Default Llc?

There are pros and cons for setting up an LLC:
Pros: you may get some extra liability protection for your personal assets
Cons: It will cost you some money to set one up and there are annual fees (not too much). You will have to keep your business and personal records separate (more paperwork).

If you set up a single person LLC you fill out exactly the same tax forms as a sole proprietor (Schedule C, Form 8829, etc.). Your taxes will be the same. So, you won't lose any tax deductions. If you set up a corporate LLC or a partnership LLC then there are different tax forms to fill out and you will lose the ability to deduct your house expenses.

Liability - You won't get full liability protection for your personal assets. For example, let's say your time-space % is 40%. That means 40% of your assets are business and these are not protected if you are an LLC. In other words, if someone sues you only 60% of your home is protected, the person suing you can come after 40% of your home which is a business asset and not protected by an LLC.

I recommend getting a lot of business liability insurance to protect yourself - $1 million per occurrence and $3 million aggregate. I don't think it's worth considering an LLC unless you are comfortable with more record keeping and have a lot of personal assets you are trying to protect.

For details on all of this see my Family Child Care Legal and Insurance Guide (www.redleafpress.org).
__________________
http://www.tomcopelandblog.com
Reply With Quote
  #5  
Old 03-12-2011, 01:55 AM
crmommy's Avatar
crmommy crmommy is offline
Daycare.com Member
 
Join Date: Mar 2011
Posts: 3
Default

Thank you so very much for explaining it in "english" and breaking it down "barney style" I swear I had more brain cells before I had kids and started doing daycare and should have understood it, but I was getting conflicting information. Thank you again!! Your help was very much appreciated and will make my decision much easier!
Reply With Quote
  #6  
Old 06-15-2018, 08:04 AM
Unregistered
Guest
 
Posts: n/a
Question Liability as a sole proprietor

Question for Tom when you say liability under a single owner LLC can the sue and take your business income from what we make from our daycare?
Reply With Quote
  #7  
Old 06-15-2018, 12:33 PM
TomCopeland's Avatar
TomCopeland TomCopeland is online now
Business Author/Trainer
 
Join Date: Jun 2010
Location: St. Paul, Minnesota
Posts: 2,789
Default Llc

Quote:
Originally Posted by Unregistered View Post
Question for Tom when you say liability under a single owner LLC can the sue and take your business income from what we make from our daycare?
No matter how you incorporate your business, if you are sued they can take your business assets. This includes all money from your business and your business property (equipment, toys, as well as the business portion of your home and furniture and appliances). It's your personal assets that are presumably protected from a lawsuit.
__________________
http://www.tomcopelandblog.com
Reply With Quote
  #8  
Old 10-11-2018, 07:45 AM
eperez's Avatar
eperez eperez is offline
Daycare.com Member
 
Join Date: May 2018
Location: New Jersey
Posts: 12
Default

Quote:
Originally Posted by TomCopeland View Post
There are pros and cons for setting up an LLC:
Pros: you may get some extra liability protection for your personal assets
Cons: It will cost you some money to set one up and there are annual fees (not too much). You will have to keep your business and personal records separate (more paperwork).

If you set up a single person LLC you fill out exactly the same tax forms as a sole proprietor (Schedule C, Form 8829, etc.). Your taxes will be the same. So, you won't lose any tax deductions. If you set up a corporate LLC or a partnership LLC then there are different tax forms to fill out and you will lose the ability to deduct your house expenses.

Liability - You won't get full liability protection for your personal assets. For example, let's say your time-space % is 40%. That means 40% of your assets are business and these are not protected if you are an LLC. In other words, if someone sues you only 60% of your home is protected, the person suing you can come after 40% of your home which is a business asset and not protected by an LLC.

I recommend getting a lot of business liability insurance to protect yourself - $1 million per occurrence and $3 million aggregate. I don't think it's worth considering an LLC unless you are comfortable with more record keeping and have a lot of personal assets you are trying to protect.

For details on all of this see my Family Child Care Legal and Insurance Guide (www.redleafpress.org).
Hi, I am planning to open a child care facility (not in my home). I have asked my accountant for advice on whether I should incorporate or be an LLC but have not received an answer.

My concern is based on having to pay income taxes on my personal returns as opposed to having the company pay for them. My understanding is that an LLC can elect to be a corporation. How would that work? I would prefer to receive a regular pay check, like any employee with taxes withdrawn and have the company responsible for the company's income taxes. What do you suggest?

Any advice/direction would be most appreciated!
Reply With Quote
  #9  
Old 10-11-2018, 12:15 PM
TomCopeland's Avatar
TomCopeland TomCopeland is online now
Business Author/Trainer
 
Join Date: Jun 2010
Location: St. Paul, Minnesota
Posts: 2,789
Default Llc

Quote:
Originally Posted by eperez View Post
Hi, I am planning to open a child care facility (not in my home). I have asked my accountant for advice on whether I should incorporate or be an LLC but have not received an answer.

My concern is based on having to pay income taxes on my personal returns as opposed to having the company pay for them. My understanding is that an LLC can elect to be a corporation. How would that work? I would prefer to receive a regular pay check, like any employee with taxes withdrawn and have the company responsible for the company's income taxes. What do you suggest?

Any advice/direction would be most appreciated!
Yes, you can set up an LLC as an S or C corporation. It only makes sense to do this if you are making a lot of money. That's because if you are the employee of the corporation the corporation will have to pay federal and state unemployment taxes and it will need to purchase workers compensation insurance for you. These are additional costs that wouldn't occur if you were a single person LLC or self employed. So, you need to ask your accountant to show you what the tax consequences would be of this decision. I say, remain self employed.
__________________
http://www.tomcopelandblog.com
Reply With Quote
  #10  
Old 10-12-2018, 08:06 AM
eperez's Avatar
eperez eperez is offline
Daycare.com Member
 
Join Date: May 2018
Location: New Jersey
Posts: 12
Default

Quote:
Originally Posted by TomCopeland View Post
Yes, you can set up an LLC as an S or C corporation. It only makes sense to do this if you are making a lot of money. That's because if you are the employee of the corporation the corporation will have to pay federal and state unemployment taxes and it will need to purchase workers compensation insurance for you. These are additional costs that wouldn't occur if you were a single person LLC or self employed. So, you need to ask your accountant to show you what the tax consequences would be of this decision. I say, remain self employed.
Thank you for the clarification!
Reply With Quote
Reply

Tags
2011, c-corp, llc, s-corp, tom copeland

Thread Tools
Display Modes

Posting Rules
You may post new threads
You may post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off

Forum Jump


All times are GMT -7. The time now is 07:21 PM.



Daycare.com         Find A Daycare         List Your Daycare         Toys & Products                 About Us

Daycare.com
Please read our Disclaimer before continuing.

Topics pertain mainly to the following States:

Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware District of Columbia Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming