LLSolutions
Senior Member
- Location
- Long Island, NY
What is everyone doing or have you done in the last few years, I know 10 years ago it was all incorporations but I'm seeing alot of EC with LLC's now. Opinions?
LLC vs INC
- Thread starter LLSolutions
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SegDog
Member
- Location
- Philadelphia
maybe...
maybe...
Of course, each state has it's own rules for business entities.
Taxlawandplanning.blogspot.com is written by a group of well-respected attorney/CPAs that teach business at universities and their law schools.
maybe...
Of course, each state has it's own rules for business entities.
Taxlawandplanning.blogspot.com is written by a group of well-respected attorney/CPAs that teach business at universities and their law schools.
renosteinke
Senior Member
- Location
- NE Arkansas
You need to check the laws specific to the state in which your corporation is based.
The definitions of the various types of corporations vary by state. For example, in Nevada there is absolutely no difference between an "Inc" and an "LLC." Maybe, somewhere, there is a distinction made.
The definitions of the various types of corporations vary by state. For example, in Nevada there is absolutely no difference between an "Inc" and an "LLC." Maybe, somewhere, there is a distinction made.
petersonra
Senior Member
- Location
- Northern illinois
- Occupation
- engineer
Most places the biggest difference is in the ownership and management structures that are allowed. LLCs normally have more flexible rules on such things. There are also some tax issues that come into play that can be advantageous for some people.
I have a very strong opinion on this subject. For many years I was in business as a sole proprietor, because accountants told me I was too small. I was always drowning in tax debt. A friends accountant showed me on paper why I need to be a corporation, no matter how small! Ever since then I don't trust popular opinion, everyone has an agenda! I do my own research and then decide.
In the matter of what kind of corporation, I say anyone who tells you that an LLC is the best, has not done the research, and his reasons should be questioned.
THE REALITY IS:
>>>>An LLC is not a corporation in the eys of the IRS. With an LLC you will be taxed as a sole proprietor, with no corporate breaks. The LLC was originally created for real estate investors to invest in a big project, yet be legally protected. Thus- the LIMITED LIABILITY CORPORATION or LLC
>>>>An S, Corp. which is recognized as the the best for small closley held companies is a proper corporation. A, C Corp. Is a traditional corporation. Do the research to understand whats best.
The reasons to help you decide are very simple:
With an LLC you will be legally protected only. No federal tax benefits.
With a S Corp. you will be legally protected and can get tax benefits also. Such as being able to take shareholder dispersments that you will not have to pay that fifteen percent FICA taxes. Right there you will save $150 taxes for every $1000 taken as a dispersment.
Copy - Pasted from an accountants forum....................
Per IRS regulations, you do not need to take salary in case of an LLC. But whether you take salary or not, there will not be any tax effect as all of your income whether salary or otherwise, will be subject to self employment tax. That is why I always suggest most of my clients to form an S corp. In most cases for small businesses, S-Corp. is better than LLC. In case of LLC, 100% of net income is subject to self employment taxes (15.30%) while in case of S-Corp., the income subject to self employment tax is typically 30-50% of net income. I have illustrated this and the tax saving impact, on my website with the help of an example.
RICK
In the matter of what kind of corporation, I say anyone who tells you that an LLC is the best, has not done the research, and his reasons should be questioned.
THE REALITY IS:
>>>>An LLC is not a corporation in the eys of the IRS. With an LLC you will be taxed as a sole proprietor, with no corporate breaks. The LLC was originally created for real estate investors to invest in a big project, yet be legally protected. Thus- the LIMITED LIABILITY CORPORATION or LLC
>>>>An S, Corp. which is recognized as the the best for small closley held companies is a proper corporation. A, C Corp. Is a traditional corporation. Do the research to understand whats best.
The reasons to help you decide are very simple:
With an LLC you will be legally protected only. No federal tax benefits.
With a S Corp. you will be legally protected and can get tax benefits also. Such as being able to take shareholder dispersments that you will not have to pay that fifteen percent FICA taxes. Right there you will save $150 taxes for every $1000 taken as a dispersment.
Copy - Pasted from an accountants forum....................
Per IRS regulations, you do not need to take salary in case of an LLC. But whether you take salary or not, there will not be any tax effect as all of your income whether salary or otherwise, will be subject to self employment tax. That is why I always suggest most of my clients to form an S corp. In most cases for small businesses, S-Corp. is better than LLC. In case of LLC, 100% of net income is subject to self employment taxes (15.30%) while in case of S-Corp., the income subject to self employment tax is typically 30-50% of net income. I have illustrated this and the tax saving impact, on my website with the help of an example.
RICK
Split Bolt
Senior Member
- Location
- Northern Virginia
Couple of points to clarify. LLC is "Limited Liability Company" not corporation. There are other issues that may sway someone to become a LLC. With a corporation, the corporation must file a separate tax return, whereas a LLC is included in the owner's tax return on the 1040, Schedule C. That's a significant savings right there. Also the business can be run as a sole proprietorship without a lot of the complications a corporation requires. Some accountants like them and some don't. Before making this decision, you must consult with your accountant. Every business owner's situation is unique. My first business was INC. I am now LLC.
Mgraw
Senior Member
- Location
- Opelousas, Louisiana
- Occupation
- Electrician
Definetly check with an accountant. I am confused by Ricks comments. My company is a LLC but I am recognized by the IRS as a S corp.
Split-Bolt
I know everyones situation is a different business model. I'm curious as to why you didn't like being an INC. I have not been able to find a good reason to be a LLC other than less bookeeping and accountants expenses. I'm a tiny company, just my son and I. I incorporated myself, (it was easy), I do all my own books with QuickBooks, and do all my taxes with Turbo Tax. When learning all this I studied past forms from former accountants, read all the forms instructions, and hired an accountant to check my work for a couple of years. For a small company it's not that hard. My biggest thing is this: I pay myself and my son as employees, we get fair pay for our area. My wife is listed as the owner of the company, ONLY. When profits build up, she takes a dispersment, she does not have to pay the 15%+ self employment tax. Then because I'm not an officer, if work stops in the winter, I qualify for unemployment, (very helpful this year). Along with that the corporation can give employees health insurance, at a 100% business deduction, sole proprietors only get a percentage. Can a LLC do any of this?
I know everyones situation is a different business model. I'm curious as to why you didn't like being an INC. I have not been able to find a good reason to be a LLC other than less bookeeping and accountants expenses. I'm a tiny company, just my son and I. I incorporated myself, (it was easy), I do all my own books with QuickBooks, and do all my taxes with Turbo Tax. When learning all this I studied past forms from former accountants, read all the forms instructions, and hired an accountant to check my work for a couple of years. For a small company it's not that hard. My biggest thing is this: I pay myself and my son as employees, we get fair pay for our area. My wife is listed as the owner of the company, ONLY. When profits build up, she takes a dispersment, she does not have to pay the 15%+ self employment tax. Then because I'm not an officer, if work stops in the winter, I qualify for unemployment, (very helpful this year). Along with that the corporation can give employees health insurance, at a 100% business deduction, sole proprietors only get a percentage. Can a LLC do any of this?
I'm on board with Wolfman on this. My wife had the first business in our family. Several years as a sole proprietor about killed us with taxes because you do pay the SS and Mediscare on everything. Now we can take a modest salary and the rest can be figured as disbursements.
Mgraw
Thats an interesting one. My guess is that to the feds your an S corp., and to your state your an LLC. Thats the sort of thing that I would research until I understood just how the accountants or lawyers set you up.
I have found that others really bear no responsibility, you sign the forms. Accountants and lawyers will make recommendations based on whats good for them. In my state lawyers charge thousands to incorporate a company. Yet you can go online to our secretary of state website and it steps you through it, even doing a name search. You pay the $173, fee and they send you the papers.
People are afraid they may make a costly mistake. The IRS will tell you that the data shows that a hired tax service is much more likley to make a mistake than a person doing his own tax forms.
Rick
Thats an interesting one. My guess is that to the feds your an S corp., and to your state your an LLC. Thats the sort of thing that I would research until I understood just how the accountants or lawyers set you up.
I have found that others really bear no responsibility, you sign the forms. Accountants and lawyers will make recommendations based on whats good for them. In my state lawyers charge thousands to incorporate a company. Yet you can go online to our secretary of state website and it steps you through it, even doing a name search. You pay the $173, fee and they send you the papers.
People are afraid they may make a costly mistake. The IRS will tell you that the data shows that a hired tax service is much more likley to make a mistake than a person doing his own tax forms.
Rick
Mgraw
Senior Member
- Location
- Opelousas, Louisiana
- Occupation
- Electrician
Rick
I don't remember all the details, it been years. My company was set up by a lawyer and an accountant. One thing I do remember is when I registered with the IRS they sent me a packet of information and forms. In the packet was a form explaining the IRS did not recognize LLCs. It also gave options as to which type of IRS entity I could choose from and some details as to the different types. I don't remember all the options because it was already decided we were going to be a S corp.
I don't remember all the details, it been years. My company was set up by a lawyer and an accountant. One thing I do remember is when I registered with the IRS they sent me a packet of information and forms. In the packet was a form explaining the IRS did not recognize LLCs. It also gave options as to which type of IRS entity I could choose from and some details as to the different types. I don't remember all the options because it was already decided we were going to be a S corp.
years back we went to a sub s on the advice of our accountant...i guess it was the right thing to do, but i don't think i ever made enough money that it really mattered....
petersonra
Senior Member
- Location
- Northern illinois
- Occupation
- engineer
the other poster is just mistaken.
subchapter S is not a type of corporation but how you deal with the profits coming from the business. it just means you can take them on your personal tax return instead of filing a tax return and paying taxes for the corporation itself. it is usually advantageous to do this.
however, there are some limitations that a traditional corporation has on who can take this pass through tax method, that are less stringent with an LLC because it has a more flexible structure.
getting accounting advice from an internet electrician forum is not any better than getting legal advice there. and it is well worth the few hundred bucks it will cost you upfront to talk with an attorney AND an accountant experienced in this kind of stuff well before you do anything about setting up a business.
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