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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Business Law
Satisfied Customers: 112777
Experience:  All corporate law, including non-profits and charitable fraternal organizations.
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My husband and I work as software consultants in healthcare.

Resolved Question:

My husband and I work as software consultants in healthcare. We would like to form our own company rather than acting as employees of other consulting firms. We want to better understand the differences between LLC, S Corp or Corp.

A major incentive is that we can control our income and benefits.

One of our most important concerns is that our personal assets are protected and separate from the company.

What are key differences in the types of company we can build and is there a reliable online source for us to review?
Submitted: 6 years ago.
Category: Business Law
Expert:  Law Educator, Esq. replied 6 years ago.
The LLC is the newer version of the S-Corp (they are both pretty much the same thing) They are "flow through" entities for tax purposes. What this means is that all profits/losses are shared by the members based on their percentage of ownership and are claimed on their personal income taxes. The LLC files a tax return, but doesn't pay taxes they issue a K-1 form to each member (like a 1099) and this is how the members file their taxes. This avoids the double taxation issue with corporations where the corporation pays taxes and then the owners pay tax on any money they take from the corporation.

The LLC is also easier to operate with less paperwork and less formality. It merely requires a membership agreement and holding one meeting per year to keep corporate books, keeping a separate account for money and in these cases the corporate veil protects anyone from coming after the members of the LLC for debts of the LLC (as long as you make no personal guarantees).

The C-corp requires issuing stock making shareholders, appointing a board of directors, keeping corporate minutes of all director meetings. For the most part for a small business this is much more complex than necessary.


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