Howdy,

I've decided to start my own consulting business. Here's what I've done so far:

1) Created my domain/website
2) Setup a FreshBooks account for accounting
3) Printed up a DBA form to take to my county clerk today.
4) Planning on stopping at the bank to open a separate checking account.
5) Planning on filing an application for an EIN after 3 and 4 are done.
6) Dedicated a credit card to business expenses only.

I have a few questions:

1) My consulting will be in IT. My wife would also like to do some consulting, but in a different area. Since it's a sole proprietorship, can I make her an employee of the company since it's a general consulting company? How does that work for expense tracking, paying her, etc?

2) What retirement account is recommended? I've read about SEP-IRA and individual 401k. We both already have Roth IRAs.

3) Paying things like mortgage and utilities: do I need to transfer money to my personal bank account first and then pay from that?

4) What about health insurance premiums? Transfer the funds first or pay directly from the business account?

5) I probably need to talk to a CPA or CFP. Any recommendations in the Cedar Park/Round Rock/NW Austin area?

Thanks!
Jake

Much of this is "your choice" as far as the IRS goes. You will be taxed as though its all 1 bank account anyway.

Where it does matter is your own organizational mindset and keeping your books clean. You get no protection from this now as a sole prop, but later, if you decide to incorporate...youll need everything nice and clean to maintain legal protections. (And you'll want them both totally separate so you can protect them against each other*)

Personally, I would keep the 2 consultancies completely separate as the cost to do so is negligible at your stage.

*not a lawyer, and not your lawyer.

1) While you could have the activities together, I would prefer to keep separate companies, separate books, separate card/accounts.

2) If no EEs other than you and possibly spouse, SEP is usually the way to go, or possibly a "Solo 401(k)" instead of a full 401(k). You'll give up some design flexibility, but minimize administration and cost.

3) Transfer the money to keep personal and business expenses in separate accounts. If helps with organization at tax time, keeps P&L easier to maintain and reduces items the IRS could look at in a limited scope audit.

4) I would think paying that one from business would be okay, CPA should verify.

5) Yep. If you struggle to find someone, I can check with peers in the area.

***Not a CPA, not an attorney. Not your CFA/CFP.***

Why sole proprietorship over an LLC?

As a CPA, i would tell you to set up an LLC. This allows for a more versatile tax vehicle that can be used greatly to your benefit. Email is in profile if you want to talk about it further.

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As a CPA, i would tell you to set up an LLC. This allows for a more versatile tax vehicle that can be used greatly to your benefit. Email is in profile if you want to talk about it further.

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this, also assists with separation of liability between personal and business in the event you goof and your client sues you.

I assumed Sole Proprietor would be simpler, but I will look into an LLC. Big Puma, email sent.

Do number 5 before you do number 4

You need to get a Texas Sales Tax Permit, too. Can't really conduct business without it.

You don't normally pay sales tax on consulting

They tax goods and services. Consulting is a service, right?

Not all services are taxable. If you pay sales tax to a CPA they are doing it wrong.

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I assumed Sole Proprietor would be simpler, but I will look into an LLC. Big Puma, email sent.

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Yes, it is simpler, but it exposes you to unlimited personal liability. It is not difficult to setup an LLC and the limited liability protection is a huge benefit.

I wouldn't use a sole proprietorship for anything beyond a lemonade stand.

Set up the LLC. Take it to your bank and watch them offer you a $15k interest free (for 9 months to a year) credit card.

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quote:

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As a CPA, i would tell you to set up an LLC. This allows for a more versatile tax vehicle that can be used greatly to your benefit. Email is in profile if you want to talk about it further.

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this, also assists with separation of liability between personal and business in the event you goof and your client sues you.

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To go a step further, its good in the event you don't goof and still get sued. But you still have to lawyer up. That's where general liability and E&O could be a great benifit. Depending on the type of consulting you will do, it could be pretty cheap.

Jake: Agree with forming an LLC. Texas Series LLC it a great tool for current asset protection with room for growth into other business or investment ventures. Let me know if you want more information or assistance with getting your entity established.

Yes sir. I would like more info. shoot me an email: jnewton at aggienetwork

You have to be careful with how your run your business for an LLC to protect your assets in any meaningful way.

The real year to year benefit of a (profitable) LLC is this...

http://www.cnbc.com/2014/03/05/cnbc-explains-the-gingrich-edwards-tax-loophole.html

Jake: e-mail sent. You can take down contact info. if you want.

I am in cedar park, I can send you some referrals my business owners use. As far as SEP/SIMPLE, I cannot answer those on a forum. I can get you information though.