Normally, setting up an LLC is fairly standard fare, so you can probably use a general “business” attorney as opposed to someone who specializes in corporations law. Once the entity is properly set up, there are normally annual state reports, etc., as well as franchise taxes the LLC might owe to the state. You may also need to file sales tax reports if you have sales and issue Form 1099s to your subcontractors. What you must file really depends on your state and the requirements of the IRS. Familiarize yourself up front with the initial and ongoing requirements, so that there are no surprises and you can properly assess the burden of going with an LLC instead of just conducting business as a sole proprietor.
If you are concerned about potential liability, the basic protection is professional liability insurance. You did not say what your H’s consulting involves, but you’d need the protection provided by a good liability insurance policy before you’d even start worrying about the risking your assets to exposure. For example, a professional liability insurance company would step in, provide litigation defense and indemnify.
Remember to separate legal issues from the taxation issues.
Attorneymother, I just finished reading a few of your links that brought me directly to that point. So we need liability insurance, yearly LLC fees, CPA and an attorney.
Thanks for helping keep us grounded.
I’m actually starting to think it would be most cost effective just to retire.
How about foregoing all of the above, and just getting enough umbrella insurance to cover it all? That is, if you can operate as a sole proprietor and the LLC isn’t required?
You don’t have to disclose the type of consulting your H does. But, if he might look at professional liability policies he can obtain through his professional association, if available.
Edited: factoring in cost will help your H and you determine what your consulting rate ought to be.
The tax season just ended, so it’s a good time to plan ahead for the rest of 2015, as you are doing. If it looks like you and your H will receive 1099 income, you need to invest some time in understanding Schedule C. LLC income is reported on Schedule C unless you elect to be treated as a corporation, in which case you’d need to file a corporate tax return.
It’s not the best reading, but here are the Schedule C instructions:
If you get an idea of the “ordinary and necessary” expenses that you incur and where each belongs on Schedule C’s line item of expenses, you can start setting up your record-keeping. Self-employment retirement contributions can either go on Line 19 of Schedule C or on Line 28 of Form 1040 if you use a SEP-IRA.
busdriver,
With our umbrella insurance, they don’t cover professional activities I tried to add my professional name as well and they didnt cover that. If someone were to sue me personally it might cover, but if its for some professional thing, it probably goes to my malpractice insurance.
Sax, I don’t know how applicable this is to your situation, but umbrella insurance covers many things, including all sorts of personal liability issues–many things that are not related to automobiles. Here’s a good link about what it covers: https://www.geico.com/information/aboutinsurance/umbrella/
Someone suggested it for us, when we were looking about forming an LLC for our rentals. Of course our lawyer wanted to form a separate LLC for each rental (at a cost per unit), so we’d have to pay annual fees on each LLC, plus thousands to the lawyer. But apparently just getting enough umbrella insurance is a very good way to cover liability on your rentals (over what insurance you already have), while covering a whole host of other issues. And it’s very easy to increase, unlike all the rest of the rigamarole.
Are Series LLC’s a thing in your state? If so you can use that to limit much of the cost to only having one LLC.
I was told that putting rentals in an LLC provides little to no protection if you do anything on the rentals yourself - maintenance, selecting tenants, hiring workers, etc., because you can be sued directly as the provider of the service, rather than as the shielded corporation. So we just got a large umbrella and didn’t go through the expense (and possible legal issues of dealing with the mortgages) of putting things into an LLC.
I don’t know about the Series LLC’s, but when I realized that I didn’t have to spend over 3K to make them LLC’s, plus the state charge and the hassle…I figured I’d just raise our umbrella policy which covers everything. Though I don’t think I got around to doing that yet. And we do almost everything ourselves, so it sounds like a LLC would be useless anyways.
We have our umbrella policy and a managing company does everything for our rentals. Our umbrella provides NO professional liability coverage, like most umbrellas. We have never formed any LLCs–for us, more trouble than value.
Taking a chance that someone might have suggestions for this situation: a state employee past the minimum retirement age died (accidental death, act of nature, no one at fault, no risky behavior involved) days before completing 25 years of service. The pension plan allows for full retirement benefits (60% +insurance) after 25 years, but partial benefits (only 36% and no insurance) at 24 years. (All other years between 15 and 24 are gradual increases, the one big jump in benefits is from year 24 to year 25.) If the unused vacation days were added, the 25 years would be complete, co-workers would donate time, etc., but these days are not allowed to be counted toward service time. With 24 years, 11mo and Xdays of service, the family gets the 36% and no insurance, which leaves them in very difficult circumstances (even worse than it sounds). They were told that this is “just the way it is, it has to be 25 years to the exact date, nothing you can do.”
My question is: Can something like this be appealed/reconsidered, and if so–how/who to contact? It will not cost the state extra because the employee was about to retire and the state would have then paid full pension if the employee hadn’t died (or had died a few days later). So it seems like the state is saving $ at the expense of widow/children, which seems unjust.
Any thoughts or advice?
I think most states have some sort of pension appeals board that they might be able to appeal to. You should be able to google it.
Verify the state has the correct starting date recorded, if you can find records after 25 years.
Did he ever have any other state jobs earlier in his career that might not be counted? In my state people have gotten time credit for volunteering for some unpaid town board positions, for example.
They might be able to get their state legislator to push a bill through that would allow them to collect the full pension. Write a letter to the governor to see if they will intervene. Get it in front of the media and maybe it will get people’s attention.
Thank you nre, I believe all hours have been accounted for. I thought about contacting a legislator. The family is not the type to ask for exceptions and will easily take “sorry, you don’t qualify” as a final answer. (Widow is so traumatized that she is unable to talk about it.) Considering the situation, it seems possible that an exception could be made. And media attention could certainly gain some support/sympathy for the family if it came to that. ( Ironically, the employee was officially recognized for his service to the state after he died. The local legislator knows who he is, so that could help.)
