The gist is

Wife wants to have a side hustle (whitening teeth so we need liability insurance).

Need an LLC

She probably won’t clear $5k in a year.

I can do the LLC online and lawyers around here want $700-$1200 to do it.


Also I hear people saying (s-corp) and other things.

Anyone here ever set one up and had to deal with all the BS?

Just want all of it straight forward and not invite the man into my life.   Not looking for tax write offs but don’t want to leave money on the table.

Thanks

I'm not a lawyer, your lawyer, etc.

As for the best solution, it really depends on your state. LLC is probably the best way to go, but there's also Corporations, LLPs, etc. You can probably setup what you want with boilerplate agreements off the internet. Corporations require you follow your bylaws or in a suit they can "pierce the veil" and go after the personal assets of you. Ditto if you break the law or something stupid like that.

That said, annual filing fees and tax prep services easily could eat $500/year. Here in TN an LLC costs you $300/year with the state. Cheapest I've seen for annual LLC tax prep is $250 - and $400-500+ is common.
If you were in Tennessee, putting that money towards more liability coverage might be the better play - then you just run the business as a Sole Proprietorship and have fewer "imperial entanglements".

If you are in a state with something like $20/year LLC annual reporting fee, and are comfortable prepping your own tax return, then the LLC would be a total no-brainer.

My state it’s $70 to file an LLC and $20 per year.


I just don’t know if I should use a boiler plate LLC and so it myself especially if they are about to change the taxes with this new bill.


Also I’m thinking general partnership LLC

A buddy said to look at an “s corp” but I don’t think that would qualify.

Thoughts?

I used an LLC for liability protection for a couple years. I read it was important to have a business bank account and to never use that for personal expenses. Pay yourself a paycheck and then use the money. They said courts will look at the separation between the business and you personal accounts, and if you mix them it opens you up to being sued. It was a freaking pain to open a business account though. I remember telling the lady at the bank you know I'm putting money in your bank not borrowing. She said federal laws make it a pain.

why do you think you need an LLC for a business generating 5k per year?

He mentioned liability. If anything goes wrong with even a $5 business, if you don't separate it out correctly, they can come after everything you own.

Exactly.
Only for liability.

Bleaching or whatever they use on teeth for coffee/tea stains. Don’t want to get sued if it discolors their teeth.

Same stuff the dentist uses but they have insurance to cover them.

Your wife should have the same sort of insurance too... if she can get an underwriter to write a policy on someone with basically no professional qualifications.

The business will still need to buy business liability insurance.  If your wife screws up someone's teeth the LLC will get sued and she will get sued, and your homeowners won't cover that.

Before she goes further she should see if she can get insurance, and what the cost of the policy is.  She may end up paying more to the insurer than she makes.

Put me down for being with Bubbles.

The LLC part: easy and cheap.

Insurance: harder and expensive.


Some states, For the LLC, you’ll need a basic business insurance setup. Then they’ll start asking exactly what they are insuring etc to sketch out your rates.
Typically they also won’t write the policy unless they add a workers comp or a few other riders with it based on industry.


Some folks might have you be partial owner but in the this case, I’d go 100% your wife as that would silo liability.


Personably id focus on a business insurance underwriter to understand the costs and commitments etc.

Then do the business paperwork around that.



Good call in the checking account. We use chase checking business line. Very cheap with great service.

Once she turns a profit, she would do an owner draw.


The problem in this scenario, you’ve got to be brutally honest with expenses vs revenue.

Ask yourself:
Is this a loss leading hobby or an actual free lance business turning a profit (even if it’s small)?

We live in a litigious society.

Curiosity...Being sued by whom and for what?

Client slips and falls.  OP's wife makes a mistake with the whitening process and client's teeth end up discolored, or worse, damaged/falling out.  Etc.

I work in IT and was moving a small data center. If things went south I didn't want to get sued by my customer. Thankfully it was successful and I never needed the LLC protection.

Is all this headache worth it when considering "She probably won’t clear $5k in a year."?

Boilerplate LLC will work fine for what you're talking about.  

When you register your LLC w/ the .gov to get an EIN, you can elect to have it treated as an S Corp.  There are some tax advantages.  

No need to mess around w/ partnerships owning LLCs for your needs.


If setting up a business banking account was a pain, it was b/c the person doing it was unfamiliar w/ doing it.  I have set up dozens and dozens of LLCs and the most it has ever taken at the bank was 20 minutes and that was b/c that particular banker was chatty.


The tax deductions could very well be worth more than $5k.  If his wife works out of a dedicated room in the house, they can deduct a portion of their utilities, internet, phone, etc.

Those are great points.

I need to read up more in it but I think if the kids work and help clean they can earn money as well.

Talk to a tax accountant.  You can take off a bunch of crap if done from home.
Get every dollar you can get.

I'm no expert.

As a non-expert, the short answer is yes - do an LLC.  Have it in her name and her name only (single member).  That makes it exempt from employment laws, since no employees (only her).  So you can ignore the many scare-tactict letters requiring you to buy and post $500 EEOP signs.  You will get come-on's to get an AMEX card - shred them.  Now it's just one extra one page form on her normal 1040 taxes.  Now you can write off the business expenses and actually keep the $5k revenue generated.  And yes, the whole point of LLC is to limit liability.

LLC's are cheap - just do it yourself.  Just make sure to pick a company name that doesn't have any regulated words (there are many) - just make it LadyStretch85 LLC, or something.  - don't call it Medical Professionsals LLC, or you will get some shit blow up in your face from left field on that.

 In theory, if she messes up and you get sued, liability is limited to LLC.  That's the whole point.   JMHO, but unless there is some sort of common lawsuit risk with her work, my take (as not an expert), is F'it on bothering withbextra insuramce for a $5k LLC - if someone sues, then they collapse the assets of the LLC.  Oh well.  Yes, anybody can sue anybody for anything - but yea, the LLC is a layer of protection.  The real point of LLC is she can write off the expenses and keep more of her revenue, which you can't really do on a personal basis so good.


Get it's own separate bank account - easy to do.

I have posted this before, but here is an excerpt from my book I wrote, "Tales of the Crazy" (on Amazon) about the hell the ex put me through. She had an LLC that failed miserably, and it did not shield me from massive debts and problems.

Forming an LLC does not shield you from financial burden and debt.
You need to protect your families and marital assets just in case there are large debts or bankruptcy has to be filed. This means one spouse should have all company bank accounts in their name, and the other one off of everything business related to protect all personal assets.
A couple of steps should be taken to protect the assets of your family.

1. Do NOT put your spouse's jointly owning the LLC. By keeping their name off this, they are shielded from potential problems if bankruptcy or frivolous lawsuits happens. They may be sued, but can't be held responsible and your joint personal assets are safe.

2. Get the home mortgage in the spouse's name that is not on the LLC. Joint marital assets are normally not collectible from judgments (except tax liens), but they will try if the spouse's name is on the mortgage and you will waste a lot of time and have a lot of attorney fees fighting this.  If the spouses' LLC has an IRS or state tax debt and their name is on the joint mortgage, the tax lien on the home must be paid and you are screwed.

3. If there are any company credit cards, NEVER have any cards issued in your spouse's name. Have them all in the LLC holder's name and SSN. Don't get secondary cards issued in their name. If there is a bankruptcy the person may be liable for all charges made on the card in their name. It does not matter if you declare bankruptcy for the LLC; the spouse may be hit with the debt if they have credit cards for the LLC. Also, if there is a screw-up on the credit card company's part that will affect credit ratings, your family needs to be shielded from this.
If there is a debt on the business credit card that is not being paid and there is another card in your spouse's name, the credit card company WILL go after them.  They probably won't win, but it will cost you at least $4K in attorney fees to fight it.

4. NEVER mix personal spending with the company credit cards. Doing this opens up personal assets to debt collection and court judgments from frivolous lawsuits.

5. The company needs to be set up in all business dealings to appear to the court that none of it is done by your spouse. Again, this is to protect your family's assets if some lowlife sues you and wins.  Just remember, anyone can sue you for whatever they want and many people make a sleazy living from doing this.  Their claim may be completely false, but you will still have to pay legal fees to fight it.  Cover yourself as much as possible to eliminate potential problems.

6. Do not EVER file tax returns combining your personal taxes with business profit or losses.  If something happens with the business falling behind on Federal or State taxes, both people on the combined return are responsible for the tax.  The government can get a levy on the spouse's bank accounts and will withdraw everything. Whoever has the LLC in their name should always file separate, not joint with their spouse.  CPA's may tell you that as a couple, losses from the business will give you a greater refund since they subtract income from the spouse, but this sets you up for both people being responsible for future tax and business debts.  It doesn't matter if tax returns are filed individually later, what matters is if the returns were filed jointly while the business was in operation.

I'm not a lawyer, your lawyer, etc.

As for the best solution, it really depends on your state. LLC is probably the best way to go, but there's also Corporations, LLPs, etc. You can probably setup what you want with boilerplate agreements off the internet. Corporations require you follow your bylaws pretty carefully or in a suit they can "pierce the veil" and go after the personal assets of you. Ditto if you break the law or something stupid like that. And ditto if you co-mingle assets (this has been spoken about already in this thread).

That said, annual filing fees and tax prep services easily could eat $500/year. Here in TN an LLC costs you $300/year with the state. Cheapest I've seen for annual LLC tax prep is $250 - and $400-500+ is common.
If you were in Tennessee, putting that money towards more liability coverage might be the better play - then you just run the business as a Sole Proprietorship and have fewer "imperial entanglements".

If you are in a state with something like $20/year LLC annual reporting fee, and are comfortable prepping your own tax return, then the LLC would be a total no-brainer IN ADDITION to insurance. Or your LLC+Taxes will be $500/year so maybe get a million dollars of liability insurance and 2m in umbrella for the same price.

I would keep this in mind.  Teeth whitening is pretty much a home thing now.  I like white teeth,  my last 3 dentists for 10 years have all said just do it at home,  it's the same stuff they do but cheaper.  They technically could do it but didn't really want to or think it was worth their time.  

The 2 avenues are crest strips, or uv activated peroxide gel. Strips are like 30 bucks,  i just bought a uv kit last month for 130 but you can get the same thing for 70. I would make sure you think through how much demand there is for such a service.