Should Daycare Become An LLC or Not??

[TomCopeland]

Single person LLC

Thank you for answer me, so what is the benefit to became a Single person LLC?, the only reason that I was thinking to became a LLC is for protection in case someone have a problem and the insurance in not enough to cover, is there any LLC home daycare that can tell me the benefits or disadvantage ,I was planning to became a single or individual LLC, as a individual LLC can I do my taxes as a self employed, were I can deduct the depreciation of my house, etc?, thank you

The advantage of a single person LLC is that your tax forms are the same as a sole proprietor and that means you can deduct expenses in the same way. If you set up any other type of LLC the forms are different, more difficult to fill out, a tax preparer will charge more to fill them out, and you will lose your house depreciation deduction.

[TomCopeland]

Llc

How much is home daycare insure 1 million and 4 million to avoid becoming LLC?, were I can get it?, If I have a LLC an a parent suit me, does he suit just my LLC or also my others assets?, as a individual LLC do I have to get another number for my taxes ?, thank you

You can get $1million occurrence and $3 million aggregate insurance from most companies. That's the max. If a parent sues you, you contact your business liability agent and they take care of the rest. They will hire an attorney to respond to the parent's lawsuit. They will either settle and pay out something or decide that the lawsuit if baseless and not pay. All your assets, business and personal, are protected under your policy.

[Unregistered]

LLC question

I plan on opening a daycare, I formed an LLC already. The profit margin is projected to he 9%. I want to apply for an SBA loan but the lady at the bank said that I should be a corporation to protect from being sued personally, but I thought that is what the LLC does. I planned on filing my taxes as a sole proprietor, but now I'm wondering if I should form an S corporation. Please help. I have been receiving a ton of conflicting information.

[Michael]

I plan on opening a daycare, I formed an LLC already. The profit margin is projected to he 9%. I want to apply for an SBA loan but the lady at the bank said that I should be a corporation to protect from being sued personally, but I thought that is what the LLC does. I planned on filing my taxes as a sole proprietor, but now I'm wondering if I should form an S corporation. Please help. I have been receiving a ton of conflicting information.

Maybe Tom Copeland chime in here. I believe an LLC can protect you but I started another LLC last year and my accountant had me switch it to an s-corp. Better for taxes and my studio project. I would suggest you speak to your accountant. Sometimes the laws change and what was good last year may not be the best option this year.

[dolores]

LLC offers some level of protection for personal assets but not 100%. As far as taxes, every year I complain to my accountant about the taxes and every year he tells me to switch to an s-corp, like Michael said. Wish I had done it in the first place.

[TomCopeland]

Llc?

Maybe Tom Copeland chime in here. I believe an LLC can protect you but I started another LLC last year and my accountant had me switch it to an s-corp. Better for taxes and my studio project. I would suggest you speak to your accountant. Sometimes the laws change and what was good last year may not be the best option this year.

There are various types of LLCs: single person LLC, partnership LLC, S and C Corp LLC. In all cases they do provide some personal liability protection so I don't know why someone would say you need to do an S Corp LLC to get this protection.

[TomCopeland]

S Corp

LLC offers some level of protection for personal assets but not 100%. As far as taxes, every year I complain to my accountant about the taxes and every year he tells me to switch to an s-corp, like Michael said. Wish I had done it in the first place.

Before switching to an S Corp, make sure you understand all the tax consequences. You will lose the ability to depreciate your home. You must set up an "accountable plan" or other process to deduct other house expenses. There are annual costs associated with an S Corp and you may have to pay more in tax preparation fees.

[vlouie574]

LLC offers some level of protection for personal assets but not 100%. As far as taxes, every year I complain to my accountant about the taxes and every year he tells me to switch to an s-corp, like Michael said. Wish I had done it in the first place.

I thought that way also until I realize many accountants/tax preparers/CPAs don't have an understanding of how home daycare tax preparation works. I've had multiple S corps and LLCs in the past, mostly in retail so I have a good understanding of how S corps work and what I can write off. But it's also a PITA and more costly especially if you've never had a corporation before. But I also knew that my taxes weren't being prepared correctly nor taking advantages of certain deductions home daycares have.

This is what I did. I ended up buying Tom Copeland's books (Tax Workbook & Organizer and Tax Companion.) These to me are the home daycare bibles. Every line of the tax paperwork is broken down in plain english. All the special rules, benefits and deductions that home daycares are allowed by the IRS as a sole prop or single LLC but wouldn't be allowed as a S-Corp. A couple quick examples are The Standard Meal Allowance Rule or Calculating Your Own Time-Space Percentage. Once you understand how it works your going to be like geez why didn't i get these books before.

So why buy the books when you can search all this stuff for "free" on this forum. Because it's not all there. And it gets confusing because different people will give different opinions. With Tom's books I was able to do a mock up of my taxes and bring it in to a tax preparer and tell him/her what I wanted to have deducted instead of me asking them what I could deduct. And when the preparer questioned me on some of the deductions (let's go back to the meal allowance and time-space calculation) I pull out Tom's book and go straight to The Standard Meal Allowance Rule and tell him that I choose to use this method instead of keeping receipts and how i'm keeping track of it. And then i'll go to the part of the book that explains the Exclusive Use Room Rule for the time-space percentage that allows me to take advantage of a much higher percentage explain how I got it and what I need to attach to the tax forms. The person doing the taxes are only going to do what's legal but they're not going to know all the rules. And you can't just tell him "well I read on the internet you can do such and such." You'll need to show proof and facts.

So if you own one home daycare or plan on starting one, I'd say stick to a being a sole proprietor.

[dolores]

Before switching to an S Corp, make sure you understand all the tax consequences. You will lose the ability to depreciate your home. You must set up an "accountable plan" or other process to deduct other house expenses. There are annual costs associated with an S Corp and you may have to pay more in tax preparation fees.

Thank you Tom . Will bring this up with my accountant.

[dolores]

I thought that way also until I realize many accountants/tax preparers/CPAs don't have an understanding of how home daycare tax preparation works. I've had multiple S corps and LLCs in the past, mostly in retail so I have a good understanding of how S corps work and what I can write off. But it's also a PITA and more costly especially if you've never had a corporation before. But I also knew that my taxes weren't being prepared correctly nor taking advantages of certain deductions home daycares have.

This is what I did. I ended up buying Tom Copeland's books (Tax Workbook & Organizer and Tax Companion.) These to me are the home daycare bibles. Every line of the tax paperwork is broken down in plain english. All the special rules, benefits and deductions that home daycares are allowed by the IRS as a sole prop or single LLC but wouldn't be allowed as a S-Corp. A couple quick examples are The Standard Meal Allowance Rule or Calculating Your Own Time-Space Percentage. Once you understand how it works your going to be like geez why didn't i get these books before.

So why buy the books when you can search all this stuff for "free" on this forum. Because it's not all there. And it gets confusing because different people will give different opinions. With Tom's books I was able to do a mock up of my taxes and bring it in to a tax preparer and tell him/her what I wanted to have deducted instead of me asking them what I could deduct. And when the preparer questioned me on some of the deductions (let's go back to the meal allowance and time-space calculation) I pull out Tom's book and go straight to The Standard Meal Allowance Rule and tell him that I choose to use this method instead of keeping receipts and how i'm keeping track of it. And then i'll go to the part of the book that explains the Exclusive Use Room Rule for the time-space percentage that allows me to take advantage of a much higher percentage explain how I got it and what I need to attach to the tax forms. The person doing the taxes are only going to do what's legal but they're not going to know all the rules. And you can't just tell him "well I read on the internet you can do such and such." You'll need to show proof and facts.

So if you own one home daycare or plan on starting one, I'd say stick to a being a sole proprietor.

I agree with you about becoming knowledgeable about our business from all angles including taxes. Interestingly, I read Tom's books many, many years ago when I started my business and they were very helpful. I need to get current versions of them.

Finding an accountant, and a lawyer, who know the home daycare business and its nuances, tax rules etc is the most challenging part of all of this. It is like looking for a needle in a haystack.

[vlouie574]

I agree with you about becoming knowledgeable about our business from all angles including taxes. Interestingly, I read Tom's books many, many years ago when I started my business and they were very helpful. I need to get current versions of them.

Finding an accountant, and a lawyer, who know the home daycare business and its nuances, tax rules etc is the most challenging part of all of this. It is like looking for a needle in a haystack.

Your not going to find one that's fully knowledgeable about this type of business and it's not their fault. But then again of course they're gonna tell you to become an S-corp. The tax preparer can charge you more money as a corporation.

That's why having the books is handy. I ended up changing my CPA because he said the same thing..s corp s corp. The new tax preparer is use now (not even a CPA) was impressed because I was showing him things in the books he had no idea about or other things that had special rules just for us. But he verified it all buy looking at the book and verifying on the IRS website. So you really need to find an accountant that is more willing to listen to you and your suggestions vs them telling you what you can or can't do. Because you'll go in brimming with ideas of what you can you deduct versus asking them what you can deduct. It'll make your life and their life easier.

Tom's latest book takes a lot of guesswork out. But every year is different and rereading and getting a refresher once a year for me is not a big deal either. Not everything in the books applies to you so you can skip sections at a time. But certain parts might apply to you the follow year. Example would be spending money on a certain home improvement that qualifies for the Section 179 rule. I have an idea of what it is, and when I'm ready to use it, it'll be there. Until then, i'm skipping it. Pick what you think applies to you, and double check with the accountant.