Home Daycare Providers...are you a Sole Proprietor, LLC, or Corp?

[Pepperth]

Hi everybody,
Lurker here and hopefully a soon to be provider. First I have to say how much I enjoy reading these forums. You all have so much experience and I'm glad I can benefit from it. I'm going through the licensing process and am curious. Do you run your business as a Sole Proprietorship, an LLC or a Corporation. What are the advantages/disadvantages? It seem like most of the home daycare providers I've come into contact with in real life are sole proprietors. Thanks in advance!!

[Blackcat31]

Welcome to the forum!

Here is some info about LLC's.

http://www.tomcopelandblog.com/2011/05/should-you-incorporate-your-family-child-care-business.html

From my understanding, there is no tax benefit to being an LLC.

I am a sole proprietorship.

[butterfly]

sole proprietor here. I'm not aware of any benefits of doing it any other way...

[melilley]

Same here, Sole Proprietor.

[Childminder]

Used to be an S-corp. Big mistake. There are posts on here about it just put S-corp in the search.

[midaycare]

I'm an LLC only because it gives you a little more protection if sued.

[melilley]

I'm an LLC only because it gives you a little more protection if sued.

I didn't know that. I thought as long as you have liability/dc insurance, you're covered.?

[LD14]

Welcome to the forum!

Here is some info about LLC's.

http://www.tomcopelandblog.com/2011/05/should-you-incorporate-your-family-child-care-business.html

From my understanding, there is no tax benefit to being an LLC.

I am a sole proprietorship.

like this This.

[midaycare]

I didn't know that. I thought as long as you have liability/dc insurance, you're covered.?

You are covered with dc insurance, and definitely need that. A LLC offers only a tiny little bit more protection, it's not even really worth it. But then again, I like to be prepared.

[melilley]

You are covered with dc insurance, and definitely need that. A LLC offers only a tiny little bit more protection, it's not even really worth it. But then again, I like to be prepared.

Oh, I see. Thanks!

[DaveA]

Sole proprietorship here. Looked into incorporating but not worth the headache at this time.

[Blackcat31]

I'm an LLC only because it gives you a little more protection if sued.

I didn't know that. I thought as long as you have liability/dc insurance, you're covered.?

This is all copied and pasted from Tom's site:

If you form an LLC or incorporate your business you may get some personal liability protection. This means that your personal assets may be protected if you are sued. However, you should not assume that such protection is automatic. If you are negligent and a child is injured or if you are accused of child abuse - being incorporated won't protect you. In addition, there are many business formalities to follow as a corporation (separate business and personal records, stockholder meetings, following your bylaws, etc.) and if you fail to follow them all you could lose this protection.

The key benefit of an LLC is limited personal liability. The idea is that if someone sued you she could not get any of your personal assets (house, personal property, savings, etc.). There are, however, several problems with this.

First, since you are using part of your home for your business, the business portion is not protected by the LLC. This means that if your Time-Space percentage was 40%, then 40% of your home (and your furniture and other equipment) is business and would not be protected.

Second, since the LLC is a relatively new type of business entity it's not clear if child care providers would really get the liability protection that is normally granted a corporation. I've heard from lawyers about this and the law is unclear whether an LLC will protect you in a lawsuit over a major injury to a child.

I don't recommend setting up an LLC unless you understand the additional fees and record keeping requirements as well as the possibility that it will not offer you complete personal liability protection. In general, your best protection is to purchase a lot of business liability insurance ($1 million per occurrence and $3 million aggregate).

[midaycare]

This is all copied and pasted from Tom's site:

If you form an LLC or incorporate your business you may get some personal liability protection. This means that your personal assets may be protected if you are sued. However, you should not assume that such protection is automatic. If you are negligent and a child is injured or if you are accused of child abuse - being incorporated won't protect you. In addition, there are many business formalities to follow as a corporation (separate business and personal records, stockholder meetings, following your bylaws, etc.) and if you fail to follow them all you could lose this protection.

The key benefit of an LLC is limited personal liability. The idea is that if someone sued you she could not get any of your personal assets (house, personal property, savings, etc.). There are, however, several problems with this.

First, since you are using part of your home for your business, the business portion is not protected by the LLC. This means that if your Time-Space percentage was 40%, then 40% of your home (and your furniture and other equipment) is business and would not be protected.

Second, since the LLC is a relatively new type of business entity it's not clear if child care providers would really get the liability protection that is normally granted a corporation. I've heard from lawyers about this and the law is unclear whether an LLC will protect you in a lawsuit over a major injury to a child.

I don't recommend setting up an LLC unless you understand the additional fees and record keeping requirements as well as the possibility that it will not offer you complete personal liability protection. In general, your best protection is to purchase a lot of business liability insurance ($1 million per occurrence and $3 million aggregate).

My husband and I talked about this in length. We decided that the LLC just made us feel better, and if it ended up offering us no extra protection except piece of mind, we were okay with that

[melilley]

This is all copied and pasted from Tom's site:

If you form an LLC or incorporate your business you may get some personal liability protection. This means that your personal assets may be protected if you are sued. However, you should not assume that such protection is automatic. If you are negligent and a child is injured or if you are accused of child abuse - being incorporated won't protect you. In addition, there are many business formalities to follow as a corporation (separate business and personal records, stockholder meetings, following your bylaws, etc.) and if you fail to follow them all you could lose this protection.

The key benefit of an LLC is limited personal liability. The idea is that if someone sued you she could not get any of your personal assets (house, personal property, savings, etc.). There are, however, several problems with this.

First, since you are using part of your home for your business, the business portion is not protected by the LLC. This means that if your Time-Space percentage was 40%, then 40% of your home (and your furniture and other equipment) is business and would not be protected.

Second, since the LLC is a relatively new type of business entity it's not clear if child care providers would really get the liability protection that is normally granted a corporation. I've heard from lawyers about this and the law is unclear whether an LLC will protect you in a lawsuit over a major injury to a child.

I don't recommend setting up an LLC unless you understand the additional fees and record keeping requirements as well as the possibility that it will not offer you complete personal liability protection. In general, your best protection is to purchase a lot of business liability insurance ($1 million per occurrence and $3 million aggregate).

Thanks bc. I knew I read this somewhere!

[grandmom]

I incorporated, reducing my taxes by hundreds each month.