How do you structure your business (for those in the US)?
Thread poster: Ashley Wans

Ashley Wans  Identity Verified
United States
Local time: 22:50
Spanish to English
+ ...
Apr 5, 2011

Hi all,

As I'm starting to get more freelance projects, I'm starting to think about how I need to structure my business to make sure I comply with tax laws and limit my own liability (i.e. avoid getting sued). I have some general questions for those of you in the US about how you structure your translating business.

-Liability: What potential pitfalls should I be aware of in terms of things that could go wrong that would result in me getting sued? The only potential issue that I can think of is if I sign a Non Disclosure Agreement and then accidentally disclose information. I assume issues like poor quality translation and not completing translations on time would simply result in me not getting paid without any further legal complications.

-What do you do to limit your liability in these respects? Do you carry malpractice or other forms of insurace? My lawyer has brought up the possibility of creating a Limit Liability Company. Is there anyone here who has chosen to go that route?

-Do I need to get something in the way if a business license or similiar permit, or may I continue to pick up freelance work without one indefinitely?

-Taxes: I am meeting with my lawyer to get specific advice on the best ways to deal with with holding and filing, but are there any common mistakes or pitfalls that I should be aware of?

Thanks to anyone here in the ProZ community who has any advice regarding these issues.

[Edited at 2011-04-05 06:24 GMT]


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Nicole Schnell  Identity Verified
United States
Local time: 22:50
English to German
+ ...
Hi neighbor, Apr 5, 2011

Greetings from Portland!

We started out as an LLC ten years ago and turned the company into a corporation about three or four years ago. LLC or Inc., neither form will protect you from getting sued - but your personal property such as your house or your car cannot be touched.


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xxxLatin_Hellas
United States
Local time: 07:50
Italian to English
+ ...
Multi-layered questions Apr 5, 2011

Welcome to the US of Sue.

I lived in Europe for many years, so didn't have to face the Sue You issue. When I moved back to the US, I slowly eliminated all US customers and now do not have any. By the end of the year, I may leave the US altogether for another continent.

Good luck to you!

In terms of asset protection, self-proprietorship, partnership, LLC and Inc rules are largely determined by your state laws or the laws of the state of incorporation. If it is a single-member, single-manager LLC, it may indeed protect little. As far as I know, Florida and Texas offer some of the best asset protection laws across the board, New York protects the least, at least for individuals. Not sure where Washington stands, but I will guess that it protects relatively little. But do your research.

The business license issue is probably determined by a combination of state, county, and municipality rules depending on the type of entity. In some cases, if you advertise locally and/or have sales locally you probably have to register with your county and/or municipality. Some local entities charge a one-time annual fee, others may charge the business as a percentage of sales. You have to know the registration and taxation rules for your state/county/municipality and how they apply to the different types of entities, Inc., LLC, partnership, self-proprietor.

For US federal tax purposes, different rules apply to parternships, corporations, sub-chapter S corporations, LLCs, and self-proprietorships. You can opt to treat a single-member or husband-wife LLC as a pass-through entity and you file using schedule C as if a sole proprietorship. Otherwise you can treat it is a corporation and follow corporation rules.

To make the best informed decision, then, you and/or your lawyer must be knowledgeable about registration, asset protection, and tax laws applicable to each type of entity at all levels, municipal, county, state, and federal.

Self-proprietorship is the simplest and least expensive. If you decide to set-up a business entity, as alluded to in the previous post, an LLC is probably the easiest way to start, but, again, how useful it is for protection purposes will depend on state law, the number of members and their relationship to one another, and the manager and his relationship to the members.

Try to define exactly what it is that you are trying to protect, find out what is the most efficient way to protect it and tax it in your legal environment, and hope that you have a lawyer who is both knowledgeable about all these aspects and honest.

Again, good luck!

[Edited at 2011-04-05 08:41 GMT]

[Edited at 2011-04-05 08:42 GMT]


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David Wright  Identity Verified
Austria
Local time: 07:50
German to English
+ ...
Liability Apr 5, 2011

Translation errors can indeed lead to legal action - eg. if a text is printed and it is then realised there is a translation error in it, you could be sued. Faulty translation of user instructions can open you up to al sorts of claims. Mistranslating a contract likewise. Whether the other party will win is a different matter, but you could end up with high legal costs.

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Nicole Schnell  Identity Verified
United States
Local time: 22:50
English to German
+ ...
@Latin_Hellas et al. Apr 5, 2011

Latin_Hellas wrote:
I slowly eliminated all US customers and now do not have any.


Well, I have never been sued or encountered any problems but the last thing I would desire in this case is dealing with foreign companies, out of my realms of jurisdiction. I prefer working with US companies because my reach is as long as theirs and I love a jurisdiction that I can actually use to my advantage.



In terms of asset protection, self-proprietorship, partnership, LLC and Inc rules are largely determined by your state laws or the laws of the state of incorporation.


Whatever form you choose for your small business, this is a federal issue and the IRS has to approve in case you change your company into an Inc. or something.
The states taxes and regulations are rather miniscule in comparison.



The business license issue is probably determined by a combination of state, county, and municipality rules depending on the type of entity. In some cases, if you advertise locally and/or have sales locally you probably have to register with your county and/or municipality. Some local entities charge a one-time annual fee, others may charge the business as a percentage of sales. You have to know the registration and taxation rules for your state/county/municipality and how they apply to the different types of entities, Inc., LLC, partnership, self-proprietor.


The business license is required as soon as your annual business income exceeds a particular amount, in Oregon for example $ 50.000, bumped up from formerly $ 25.000 a few years ago. It varies from state to state but is has nothing to do with your business name registration with the state authorities or how you advertise.


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Daina Jauntirans  Identity Verified
Local time: 00:50
German to English
+ ...
Company structure and taxes Apr 5, 2011

I started out as a sole proprietor and now have an S-corp. Even though it is a bit more work and expense, the S-corp structure helped me get control of my taxes in that my taxes get taken out of my check like a regular employee's. Before that I was always behind because I kept earning more each year (darn!) and therefore was always under on taxes since quarterlies are based on the prior year. Also, the S-corp does provide that liability protection. I happily pay an accountant to file both personal and business taxes. That's just not one skill I wish to spend the time and effort acquiring - I'd rather be translating.


[Edited at 2011-04-05 15:50 GMT]


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Nicole Schnell  Identity Verified
United States
Local time: 22:50
English to German
+ ...
Exactly. Apr 5, 2011

Daina Jauntirans wrote:

I started out as a sole proprietor and now have an S-corp. Even though it is a bit more work and expense, the S-corp structure helped me get control of my taxes in that my taxes get taken out of my check like a regular employee's. Before that I was always behind because I kept earning more each year (darn!) and therefore was always under on taxes since quarterlies are based on the prior year. Also, the S-corp does provide that liability protection. I happily pay an accountant to file both personal and business taxes. That's just not one skill I wish to spend the time and effort acquiring - I'd rather be translating.


Technically we are employees of our own companies.


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Daina Jauntirans  Identity Verified
Local time: 00:50
German to English
+ ...
No problems Apr 5, 2011

Knock on wood - I have not had any problems w/ US or foreign companies, agencies, individuals, either.

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Ashley Wans  Identity Verified
United States
Local time: 22:50
Spanish to English
+ ...
TOPIC STARTER
Thank you all Apr 8, 2011

Your input on this matter was really appreciated!

I filed my WA state business license today. Certainly an exciting moment as I move forward in the translation industry!


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Nicole Schnell  Identity Verified
United States
Local time: 22:50
English to German
+ ...
Congrats! Apr 8, 2011

Ashley Wans wrote:

I filed my WA state business license today. Certainly an exciting moment as I move forward in the translation industry!





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