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  1. #1
    Join Date
    Oct 2012
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    24

    Default How Should a Retiree Start a Business

    My question involves business law in the state of: PA

    I am retired, I receive money from SS

    I have been selling my product online for over a year using paypal as payment. Paypal is now requesting SS#'s.

    I do not make much maybe $3000 this year, could have made more but things just happen with life.

    If I open a business does this affect my SS income? Am I reading right that I can make up to $600 a month?

    I know I will need to register a business name, apply for sales tax license, do I just need to fill out a #941 for myself? what if the income is 0 from start up?

    Is it better to be a sole proprietor or an LLC?

    Are small business owners receiving some kind of help now? I mean is your business income taxed lowered etc., not a handout

    I appreciate this forum, I never knew it existed, thanks in advance

  2. #2
    Join Date
    Sep 2012
    Posts
    101

    Default Re: How Should a Retiree Start a Business

    "Is it better to be a sole proprietor or an LLC?" - There is no formal requirement in setting up sole proprietorship. However, you would want to avoid sole proprietorship because you have to pay self-employment taxes. Moreover, you would be personally liable for all claims against the business!! Of-course, you can reduce liability by making a non-recourse provisions in the contract with 3rd parties.

    In LLC, you get pass-through federal tax treatment, full limited liability protections for members, and maximum governance flexibility as in sole proprietorship.

  3. #3
    Join Date
    Sep 2010
    Posts
    19,901

    Default Re: How Should a Retiree Start a Business

    Full limited liability protection isn't much in a single member LLC and the tax implications are about the same as for a sole proprietorship.

    To answer the other questions: There is no special tax treatment for small businesses or double dippers.

    If you are of retirement age (65, 67 or whatever depending on when you were born), you don't get your retirement benefits diminished for working.
    http://www.ssa.gov/pubs/10069.html#a0=0



    If we're talking the IRS form 941, unless you are employing others, you don't file that period.

    If you are operating under a real name (your name, or an LLC name) you don't need to register a business name. If you are using a name different than an LLC/personal name, then you do have to register the DBA / Fictitious name.

    PA Sales tax info here:
    http://www.portal.state.pa.us/portal...ancy_tax/14487

    Check out in your area if there is some TRAINING available to you. Often libraries are a good source of this information.
    There's also this:
    http://www.pasbdc.org

  4. #4
    Join Date
    Sep 2012
    Posts
    101

    Default Re: How Should a Retiree Start a Business

    Hi flyingron,

    I would like to know why is it that the "tax implications are about the same as for a sole proprietorship?" I thought that an LLC can select either to be tax as partnership or corporation. Obviously, he can select to be tax as like partnership. If so, he would be able to receive pass-through tax treatment while avoiding double taxation as in corporation. I thought that the IRS doesn't require him to pay self-employment tax. However, he may be subject to income tax if he is involved in the operation of the company.

    Moreover, as to the limited liability aspect, I thought that he would be shielded from tort and contract liability? Obviously, he would still be liable for tort if he directly involved in it.

    Thank you,

  5. #5
    Join Date
    Sep 2010
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    19,901

    Default Re: How Should a Retiree Start a Business

    It can be taxed as an S corporation, but it's not going to make any difference. Either way you are not double taxed, and if you work for your LLC/Corporation, you are still obligated to be taxed as an employee. So your choice is to pay tax as an employer/employee or self-employed, but you can't avoid paying the SS/SE tax on work you do.

  6. #6
    Join Date
    Sep 2012
    Posts
    101

    Default Re: How Should a Retiree Start a Business

    Quote Quoting flyingron
    View Post
    So your choice is to pay tax as an employer/employee or self-employed.
    I appreciate for your response. Would it make a different if I pay tax as an employer/employee as compare to self-employed? Obviously, self-employment tax is subject to SS and Medicare.

  7. #7
    Join Date
    Oct 2006
    Posts
    16,474

    Default Re: How Should a Retiree Start a Business

    Quote Quoting Vincentlyjd
    View Post
    I appreciate for your response. Would it make a different if I pay tax as an employer/employee as compare to self-employed? Obviously, self-employment tax is subject to SS and Medicare.
    Partnership income is also subject to self-employment tax, and a shareholder working in an S-corp is supposed to receive proper wages from the S-corp, which would also include both the employer and employee share of social security and medicare tax, therefore nothing would be any different.

    A single member LLC is a disregarded entity, therefore someone with an LLC who has only one member would still file a Schedule C on their personal return, therefore would have no pass through income.

    This particular taxpayer has a small amount of self employment income annually. There is no reason why they need to set up any kind of business entity to handle that small amount of self employment income. If the nature of the business arises to some kind of potential liability, then they need to get liability insurance.

  8. #8
    Join Date
    Sep 2012
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    101

    Default Re: How Should a Retiree Start a Business

    Quote Quoting llworking
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    Partnership income is also subject to self-employment tax, and a shareholder working in an S-corp is supposed to receive proper wages from the S-corp, which would also include both the employer and employee share of social security and medicare tax, therefore nothing would be any different.

    A single member LLC is a disregarded entity, therefore someone with an LLC who has only one member would still file a Schedule C on their personal return, therefore would have no pass through income.

    This particular taxpayer has a small amount of self employment income annually. There is no reason why they need to set up any kind of business entity to handle that small amount of self employment income. If the nature of the business arises to some kind of potential liability, then they need to get liability insurance.
    Thank you very much for the full explanation to the questions. I now have a better understanding about the tax rule of a single member LLC.

    However, I am partially disagree with the recommendation that he shouldn't set up an S corporation or an LLC. I believe that it is cheaper to set up an LLC than having to pay insurance premium every month. He can set up an LLC for a very affordable price ranging from $49 to $200. If a potential liability occurred, the other party can't go after his personal assets.

    Maybe you are right. He only earned about 3k this year, so it wouldn't justify the amount of effort as to set up any kind of business entity.

  9. #9
    Join Date
    Mar 2008
    Posts
    1,995

    Default Re: How Should a Retiree Start a Business

    About using an LLC, S Corp or not, there's a few other considerations.

    I own rentals, and still have an S Corp for my IT consulting business. For an SMLLC, if the owner does the work, or manages property himself, he will find the LLC or S corp AND he himself sued personally. I found that out when I bought a business from someone, something went wrong BEFORE I took over, and the owner AND his S Corp was sued. The S Corp insurance compnay told him to get a lawyer for HIS part, as the insurance covers the S Corp only.

    Also, here in NY, and in CA, LLC fees are high, $800/year in CA, and in NY, or $500 now and going up for a 2 member. I have a CPA doing taxes, so a "1065 partnership" return with K1's runs me another $500, and I had a prior CPA charging $800.00. So for my rental business at one time $3,000,000 umbrella policy for my rental runs me around $1,800 for up to six small properties, though I have to get a commercial umbrella if I exceeded those limits.

    I did the calculations and I decided to get more insurance instead of going the LLC route, at least for my rentals, especially if I'll be sued personally anyway.

  10. #10
    Join Date
    Sep 2012
    Posts
    101

    Default Re: How Should a Retiree Start a Business

    Quote Quoting SChinFChin
    View Post
    I did the calculations and I decided to get more insurance instead of going the LLC route, at least for my rentals, especially if I'll be sued personally anyway.
    There is no annual reports in Texas. I guess it depends what state you live in.

    http://www.northwestregisteredagent.com/texas-LLC.html

    "For an SMLLC, if the owner does the work, or manages property himself, he will find the LLC or S corp AND he himself sued personally." - For tort, you are personally liable if you are directly involve. Other than that, an LLC or an S corporation "won't be held personally liable for debts should the business be unable to pay its creditors." Of-course, there is an exception under "piercing the corporate veil," but it is unlikely to happen. Yesterday, I was advised by a very prominent lawyer to set up an LLC, instead of sole proprietorship, mainly for liability property. As stated earlier, I guess it also depends what state you live in.

    http://www.nolo.com/legal-encycloped...eil-33006.html

    BTW, thank you very much for the information. I will definitely take those information into a consideration before setting up a new business.

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