How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask rvlaw Your Own Question
rvlaw
rvlaw, Attorney
Category: Business Law
Satisfied Customers: 8386
Experience:  NYC Trial Attorney 30+ years; Law professor ; BUSINESS LAW; CONTRACTS; TORTS; Arbitrator
3071004
Type Your Business Law Question Here...
rvlaw is online now
A new question is answered every 9 seconds

Whats the difference between an LLC and a S and C Corp? I

This answer was rated:

What's the difference between an LLC and a S and C Corp? I just registered an LLC here in california and i also have an office in India which i will be registering a PVT there. I plan on moving to Nevada soon, and i know Nevada has no federal taxes. So would i need to re-register the LLC in Nevada? Since it's a California LLC? How would that work?

Thanks.

Hi and welcome to JA

LLC advantages:
An LLC can elect to be taxed as a sole proprietor, partnership, S corporation or C corporation (as long as they would otherwise qualify for such tax treatment), providing for a great deal of flexibility.
A limited liability company with multiple members that elects to be taxed as partnership may specially allocate the members' distributive share of income, gain, loss, deduction, or credit via the company operating agreement on a basis other than the ownership percentage of each member. S corporations may not specially allocation profits, losses and other tax items under US tax law.
Limited liability, meaning that the owners of the LLC, called "members," are protected from some or all liability for acts and debts of the LLC depending on state shield laws.
Much less administrative paperwork and record keeping than a corporation.
Pass-through taxation (i.e., no double taxation), unless the LLC elects to be taxed as a C corporation.
Using default tax classification, profits are taxed personally at the member level, not at the LLC level.
For Real Estate companies, each separate property can be owned by its own, individual LLC, thereby shielding not only the owners, but their other properties from cross-liability.

LLC Disadvantages
Although there is no statutory requirement for an operating agreement in most states, members of a multiple member LLC who operate without one may run into problems.
Unlike state laws regarding stock corporations, which are very well developed and provide for a variety of governance and protective provisions for the corporation and its shareholders, most states do not dictate detailed governance and protective provisions for the members of a limited liability company.
Thus, in the absence of such statutory provisions, the members of an LLC must establish governance and protective provisions pursuant to an operating agreement or similar governing document.
It may be more difficult to raise financial capital for an LLC as investors may be more comfortable investing funds in the better-understood corporate form with a view toward an eventual IPO. One possible solution may be to form a new corporation and merge into it, dissolving the LLC and converting into a corporation.
New York, for instance, levies a franchise tax or capital values tax on LLCs. In essence, this franchise or business privilege tax is the "fee" the LLC pays the state for the benefit of limited liability.
New York,also as an example, imposes a publication requirement upon formation of the LLC which requires that the members of the LLC publish a notice in newspapers in the geographic region that the LLC will be located that it is being formed. For LLC's located in major metropolitan areas (e.g. New York City), the cost of publication can be significant.
The management structure of an LLC may be unfamiliar to many. Unlike corporations, they are not required to have a board of directors or officers. (This could also be seen as an advantage to some.)
The principals of LLCs use many different titles—e.g., member, manager, managing member, managing director, chief executive officer, president, and partner. As such, it can be difficult to determine who actually has the authority to enter into a contract on the LLC's behalf.

Choice of S or C Corporation They are really not that different. It depends on your situation:

1. C corp : limited liability protection; ease of raising capital; ease of adding owners and shareholders;taxed as an entity (as opposed to S); C will involve double tax (not so with an S). A corporation may qualify as a C corporation without regard to any limit on the number of shareholders, foreign or domestic. It will last forever.

2. S corp: this is a flow through entity. It is not itself subject to income tax, rather the shareholders are subject to tax on their pro rata share of income based on their shareholdings. The corporation shares must be held by a resident or citizen individuals or certain qualifying trusts.


Please press 3 or 4 or 5 below so that I may get credit for assisting you.
Please do NOT press 1 or 2 since that will result in a negative rating for me which
you may not have intended If you want further information or clarification, just ask before you accept my answer and give a rating.

Also, I ask you to be fair in your rating. For instance, these should NOT have received a negative rating:

a. A customer says "I ALREADY KNEW THAT".....but the expert didn't know what the customer knew or didn't know.
b. A customer wants to hear "YES YOU CAN".....but the certified legal expert says "LEGALLY NO YOU CAN'T".
c. The answer is short, but ACCURATE. A customer simply wants a longer answer.

Thank you for reading this and for your consideration. I'm always ready to help further.

rich
But remember this is not legal advice. You have to consult with an attorney in your state and discuss this matter with him or her.

To find an attorney, go online to Martindale.com. This is a nationwide directory we lawyers use ourselves to find highly qualified legal specialists in various fields of law. These lawyers are NOT in Martindale because they paid to be included. They are there because they are rated as QUALIFIED by other lawyers in their field of expertise and geographic area as it applies to your kind of case. The process is this: other lawyers are asked to fill out questionnaires giving their opinion of the quality of the work of the law firm that ultimately appears in Martindale.

The site is organized geographically and by legal specialty. Consult with two or three and select the one you are most comfortable with. The Martindale listing will have the names of current or past clients. Contact those clients as references for the firm.




Please press 3 or 4 or 5 below so that I may get credit for assisting you.
Please do NOT press 1 or 2 since that will result in a negative rating for me which
you may not have intended If you want further information or clarification, just ask before you accept my answer and give a rating.

Also, I ask you to be fair in your rating. For instance, these should NOT have received a negative rating:

a. A customer says "I ALREADY KNEW THAT".....but the expert didn't know what the customer knew or didn't know.
b. A customer wants to hear "YES YOU CAN".....but the certified legal expert says "LEGALLY NO YOU CAN'T".
c. The answer is short, but ACCURATE. A customer simply wants a longer answer.

Thank you for reading this and for your consideration. I'm always ready to help further.

rich

REGISTER THE LLC IN NE

RICH

Customer: replied 4 years ago.
Well, our business will be global. We have an office in India, and are expanding to the US and Mexico. We just formed this LLC, and are going to form a PVT in India. Right now we are not looking for investors, but in the future we might wanna get more investors as we are more profitable.

So are you saying the LLC is a waste as we grow and we need more investors/funding? Will it be good to have the LLC as it is now, and when we start growing bigger we form a Corporation and merge the LLC into it; which will dissolve the LLC, and convert it into a Corporation?

So do most businesses convert to a Corporation from an LLC as they start generating more business, grow, and get more shareholders?

Let me know what is best to do, and i will be hiring a good CPA.

1. Understood

2. Correct

3.Depends on how big they get.....no general rule.

4. You have big plans. You need a top notch sophisticated corporate law firm to coordinate your interests. Such a firm may recommend a CPA.

Keep me posted on your growth.

rich

Customer: replied 4 years ago.
Will keep you posted, and rate you well on here.. Do you recommend any corporate law firms in San Diego, CA and CPA? How can i find a good corporate law firm to go through for all my business needs?

Also, our website is www.webvizards.com

First, I don't know any firms in San Diego. Second, even if I did, Just Answer rules prevent us from recommending particular lawyers.

The acceptances and the payments I get here are not nearly as important to me as a high rating. That means I've been of help, which is what I'm here for.

Good luck and keep me posted.

rich

rvlaw and 5 other Business Law Specialists are ready to help you