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MShore Law
MShore Law, Attorney
Category: Business Law
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Experience:  Drafted Negotiated and/or Reviewed Thousands of Commercial Agreements
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Is there a reason to incorporate in the state you will be doing

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Is there a reason to incorporate in the state you will be doing business in? This is a one store, one state business.
Thank you for the post, I am happy to assist you by answering your questions. Is the business already incorporated elsewhere? If not, does it operate as a sole proprietorship?
Customer: replied 4 years ago.

This is a new business.



Thank you Tom, if you do not incorporate would you otherwise register the business as a separate entity?
Customer: replied 4 years ago.

Probably. As a partnership.


We have substantial assets and will not be operating the business ourselves. With the incorporation we were looking at the limited liability. We don't want to jepordize the other assets. We will start this business with us putting in $150,000 and our daughter running the business. We wanted the s-corp to get taxed just once and our individual rates are probably in the 15% range.

Thank you, XXXXX XXXXX than incorporate, and face dual taxation, an LLP would be a better option. The issue with registering the business in a specific state, you would have to register in the state the business does business, but often business will be principally domiciled in a state where the laws are favorable. This is why so many businesses are founded in DE and operate elsewhere as a foreign entity, understanding that they must register in those States as well. Please let me know if you have any follow up questions.
Customer: replied 4 years ago.

Don't s-corps just get taxed on the personal level of the stock holders that receive pass through income? Aren't they essentially LLP's without stock? Whay an LLP instead of an s-corp?

No, they are taxed on their proportional share of pro-rata income from the S-Corp, whether distributed or not. LLPs are actually pass through.
Customer: replied 4 years ago.

I don't understand the difference between "income whether distributed or not" and "actually pass through." Not trying to be difficult or dumb, just trying to understand your answers.

Not a problem Tom, but why did you rate my answers negatively? What I mean is that with an S-Corp, if the allocation of income is not distributed (i.e. shareholders never realize it) and it rolls over, the shareholders are still taxed on under what is known as phantom income. When income is realized by the shareholders it is considered to pass through.
Customer: replied 4 years ago.

But isn't the same thing true if the partners make income and decide to reinvest it in the business?


I only rated you bad because I thought the conversation had ended without having understood your answer. Thanks for continuing.

Yes (if you mean that the income is never distributed to the partners and the business allocates the income for marketing, product, etc.)
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