To Inc. or LLC??

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MJReigle

Member
I am going to start a small company (read: one man show for now) and I am trying to decide between Incorporation and LLC. I am leaning towards LLC, but I still need to sit down with my accountant.Those of you that have started your own business, which way did you choose and why?
 

brantmacga

Senior Member
Location
Georgia
Occupation
Electrical contractor
i did an s-corp. i only pay self-employment tax on my salary, where as if i were an llc i would have to pay self-employement tax on all of my company's earnings. i also only pay income tax once, just like an llc. unless you plan on taking your company public someday, an s-corp would be just fine for you. talk to your accountant about it and they should be able to tell you what's best.
 

scwirenut

Senior Member
If you choose Inc, such as I did , you will want a sub-chapter-S status from the IRS, basically your profit at the year end is taxed at the personal rate. Its all the good benefits of Inc, with tax benefits of Sole Prop.....
 

brantmacga

Senior Member
Location
Georgia
Occupation
Electrical contractor
cschmid said:
I would due the LLC just because of the liability..it is best choice for that tax wise I don't think it makes much difference..
w/ an s-corp, you have the same liability protection as a shareholder that you would w/ an llc.
 

petersonra

Senior Member
Location
Northern illinois
Occupation
engineer
brantmacga said:
w/ an s-corp, you have the same liability protection as a shareholder that you would w/ an llc.
I think we are mixing terms up here. Sub chapter S refers to how the IRS treats the income from your company. It has nothing to do with the structure of your company.

For the most part, the owners of a LLC have no liability for the debts of the LLC beyond what they have in the business, just like a shareholder in a publicly traded company. In a sole proprietorship, the owner has unlimited liability for debts of the business.

However it is not quite as clearcut as you might think. Many vendors will not extend credit to small companies (at least initially in any case) without a personal guarantee from the owner. Sometimes it is not even clear that a personal guarantee is in effect. Depending on how things are worded, if the owner were to sign for a skid of parts, he might well be personally liable for paying for them, and not even truly realize it. That is why many companies do not actually sign for parts received, but rather have a stamp with the company name on it rather than an individual. That way it is clear the company accepted the goods rather than an individual.
 

cschmid

Senior Member
I know if you are share holder for your inc. Business..and you sign for materials you can personally be held accountable..So being Inc. and being the manager / president puts you back in the responsible role for Debt..So it is double edge sword..
 

petersonra

Senior Member
Location
Northern illinois
Occupation
engineer
cschmid said:
I know if you are share holder for your inc. Business..and you sign for materials you can personally be held accountable..So being Inc. and being the manager / president puts you back in the responsible role for Debt..So it is double edge sword..
that is why you buy a stamp that has the company name on it and use it rather than signing your own name when you receive materials.
 

MJReigle

Member
I thought this thread would generate some good points for both sides and it has......I definitely will be sitting down with my accountant this week to go over all the details. I think in the end this is just like everything else you do, different things fit different people.......its all about what works best for you and your situation.
 

petersonra

Senior Member
Location
Northern illinois
Occupation
engineer
Rewire said:
The next batch of auditors are being trained for LLCs which will be the next IRS target.
I don't know why people think LLCs are such a tax boon. For the most part it is just a normal company with a limited number of stockholders (I think it is limited to 50) and a very flexible structure (generally a BOD is not required for one thing).

There are no special tax benefits.
 

cschmid

Senior Member
The thing about A LLC is it limits the amount of liability to the shareholders and yet allows the shareholders to participate more aggressively in the company..Where as with a INC there are couple of types like type c and type s did I missome..These companies are designed for the shareholders to be more managerial in nature..
 
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