Hello, I will be assisting you
Here's a brief over view of the various options:
Sole P - does not provide any liability protection. In effect a sole proprietorship is just you conducting business
c-corp has a double taxation issue (the corp is taxed on profits and then the shareholder is taxed on dividends)
c-corps are good if you will be fund raising for your company
you are left with LLCs and s-corps. Both are pass through entities meaning that the entity is not taxed and all profit and losses flow to the principals (no double taxation)
Hi, thank you for the info. Ok well initially I may not be getting an investment initally so it seems best that I file under LLC or S-corp
I would think?
correct. LLCs are good if you have more than one person or in the case of a husband and wife more than the couple
Ok how about LLC's and S-corp what would be that major difference?
otherwise as a one member LLC you have to pay social security+ Medicare tax and it's not deductible
woth s-corps are you can issue yourself a reasonable salary and be taxed at ordinary income level and then take the rest as dividend taxed at capital gain (lower rate than ordinary income)
typo: with s-corps...
Then why would anyone pick c-corp over s-corp or LLC? because a couple similar companies filed under c-corp and im trying to figure out why. is it for them to get an investment?
be mindful that non-use residents cannot be shareholders in an s-corps and you are limited to 100 shareholder.
because funds and other investors cannot invest in LLC (they cannot accept losses as a distribution) Also as an LLC you don't get stock you get a membership interest.
corporate law favors c-corps
I see. so in order for you to get an investment it must be c-corp?
if it's from a fund then most of the time yes. If it's a private investor then LLCs and any flavor of corps works
one other important distiction between s-corps and c-corps is that with an s-corp you can have only one class of shares
c-corps can have unlimited classes of shares
I see. what do you recommend in order for me to decide which option best fits the business I want to start?
ok got that
generally if it's one person then s-corp work. If you have partners or plan to have partners immanently then these days most choose LLCs
ok well it's going to be me for now and eventually I may have partners or more employee's. So you recommend it being filed under LLC?
as noted with one member LLCs you will be paying the highest tax rate in your tax bracket because the social security and medicate taxes are not deductable
if you're not planning on making a whole lot then it's not going to matter
all that much
Ok well I don't want to sell myself short :) I hope I do make a lot. If you had to recommend one option what would it be....
it's difficult to say because right now an s-corp would probably work for you but if you want to add someone that only has a profit share as an example then an s-crop will not work. here's how to decide: if future flexibility is really important to you then choose an LLC if you don't have a clear plan on how the future might look like then go with an s-corp
as you can see there are lot of moving targets to consider here...
and you can convert the legal structure right?
lets say if I chose S corp
and wanted LLC?
most jurisdiction allow for "conversion"
actually what you could do is start an LLC and choose to be taxed as an s-corp
it's something new that the IRS instituted a few years ago. You should check this option with your accountant
where would I determine to be taxed as an s-corp
it might be the best of both worlds
it's an election you would make with the IRS
ok if not then I can pick LLC and convert later or vice a versa
I got it
thank you for the info :0
really appreciate it
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