Being Your Own Boss in the Geosciences:

Understanding Business Entities, Taxes, Liability and Insurance

If you are considering setting out on your own and starting your own geoscience consultancy, you’ll need to get all your legal ducks in a row, and that includes choosing the most suitable business entity for your situation.

You can choose to run your business as a sole proprietor, a Limited Liability Company (LLC) or a corporation. If you are going to manage this business on your own and don’t intend to open it up to shareholders for now, then you will be looking at either operating a sole proprietorship or an LLC.

Differences Between a Sole Proprietor vs an LLC

Sole proprietorship is the easiest type of business to start and many people gravitate to it simply because it is easy and doesn’t require any paperwork to set up. If you are running a business on your own, you are automatically assumed to be the sole proprietor and you have complete autonomous control.

Sole proprietorships also have a low tax rate and great deductions (you can deduct your health insurance and if you operate from a home office you can deduct some rent and utilities). This can be a suitable business entity for many types of freelancers, consultants and one-person service type businesses.

However, as a sole proprietor a major drawback is that you have no liability protection. Your personal income and assets are at risk in the case of a lawsuit and you are personally responsible for any business debts. In the case of business failure or a major legal settlement, there is the potential to lose everything (your house, car, personal savings and investments).

As a geoscience consultant, you will likely be advising clients on a host of scenarios that include the potential for risks to structures, water supplies, the environment and human health and safety. Before you begin this type of work, you should be prepared for the possibility of lawsuits brought against your business.

Forming a single-member LLC is one way to protect yourself. You will be considered a pass-through business (your business income will pass through and be taxed on your personal income return just like sole proprietorship), but your personal assets will have liability protection in case your company is sued, in debt or goes bankrupt. This means that someone suing your company can’t come after your house, car, etc. Of note, some states (e.g. California) do not allow LLC for geologists.

If you plan to start a geology consulting business with a partner or partners, you can also create a multi-member LLC which specifies the percentage of the profits going to each partner. Each LLC member pays taxes on their share of the profits on their personal income taxes.

If you are planning on starting a company that will be open to shareholders, you will need to investigate operating a corporation, which is much more complicated than starting a sole proprietorship or LLC. Find more information on the differences between LLCs and corporations here.

Protect Your Business with Insurance

As a business owner, there are a wide variety of accidents and expenses you could be liable for during the course of doing business. To further protect your company, you should consult with an insurance professional and/or your financial advisor to discuss what kinds of insurance you may want to hold, including professional liability insurance (also termed Errors & Omissions, or E&O), worker’s compensation, equipment insurance, cyber liability and others.

Do you have more questions about starting your own geoscience consultancy? Our members have a wealth of knowledge to share. Join us!

Share this post:

Comments on "Being Your Own Boss in the Geosciences:"

Comments 0-5 of 0

Please login to comment