I have a friend that recently started servicing pools for a local pool service company. The company is paying him a flat monthly fee without taxes. This is dangerous being a 1099 worker, especially if you aren’t planning ahead for the eventual tax man come next April.
Whether you are a regular W2 employee looking to spread your wings and go it on your own, a 1099 worker taking a flat monthly payout or getting paid a certain amount per pool, or you are already out on your own trying to figure this all out – this post is for you!
Starting a weekly swimming pool care business can be an exciting and lucrative venture. However, before diving headfirst into your entrepreneurial journey, it is crucial to consider the legal structure of your business.
Selecting the correct business entity can have a significant impact on your company’s operations, taxes, liability, and long-term success. In this blog, I will explore the various business entities available and guide you in choosing the most suitable one for your weekly pool care business.
- Sole Proprietorship: A sole proprietor is the simplest and most common business entity. A sole proprietor is a single individual owning and operating the business. While this structure offers simplicity and minimul startup costs, it also means that you bear full personal responsibility and liability for any debts incurred by your business. If you operate a small-scale weekly pool care business and do not anticipate taking on significant risks, a sole proprietorship might be the option for you.
- Partnerships: If you plan to start your weekly pool care business with a partner or multiple individuals, a partnership structure might be appropriate. In a partnership, two or more individuals share the ownership, responsibilities, and profits of the business. It is crucial to draft a partnership agreement outlining roles, responsibilities, and profit-sharing arrangements to avoid potential conflicts and ensure a smooth operation. According to Dave Ramsey, 80% of business partnerships fail and here are the five reasons why: Death, Disability, Disinterest, Drugs, and Divorce. You can also add Dishonesty. I tend to agree. They almost always end, and they rarely end well. Do your homework and consult legal advice when creating a partnership agreement.
- Limited Liability Company (LLC): A Limited Liability Company is a popular business entity that combines the simplicity of a sole proprietorship with the liability protection of a corporation. As an LLC owner, also known as a member, you are shielded from personal liability for the company’s debts and obligations like your vehicles, house, or savings accounts. This structure offers flexibility in terms of management and taxation. Additionally, an LLC allows you to maintain a separate legal identity, which can enhance your professional image and credibility.
These are the three business entity types. I prefer the LLC over a sole proprietorship. LLCs are a good choice for pool business owners who want to protect personal assets and pay a lower tax rate.
Do you own a weekly pool care business? What is your business entity and why? Comment below.