When do I turn my sole proprietorship into a small business?

I have a 40-hour job working for a legal firm. On the side, I teach private home lessons in computer science for kids aged 8 to 14. The latter profession is good money and I've recently gotten close to having enough clients to leave my legal job and embrace a 10-hour workweek.

In the short-term, though, I've had to give away one of my hours to a friend whom I trust to teach the material well, interact with the student engagingly, and really needs the money. I simply couldn't coordinate regularly with a particular student given my workweek, plus commute time, plus frequent scheduling problems (unavoidable for students at this age). The friend is flexible enough to do so.

This business had always been a sole proprietorship. I understand this to mean that my friend is acting as a subcontractor to me. His relationship with the client is handled through me, but ultimately he's getting the money directly from my client and I take no cut whatsoever. However, my friend says he'd be willing to work as my employee if I wanted to turn my teaching operation into an LLC or S Corp. In addition, another friend in the field wants to work for me provided I can find him a few clients.

I've done some light research on my business options but I still don't really know: what I lose for forming an LLC, what I lose for forming an S Corp, and what I miss out on by staying as a sole proprietorship. I definitely need health insurance soon (I turn 26 in July), and I want to make sure that my taxes don't increase too much unnecessarily.

Aside from any insight you all can give me, can you please tell me where to look for an authoritative, comprehensive consultation that lets me ask all the questions necessary to get me personalized advice for my situation? Do I talk to a business lawyer? A tax accountant? A guy at a bank? And how much should I expect the consult to cost me?

Thank you in advance.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s