Business Law

Ask a Business Lawyer. Get Business Law Questions Answered ASAP.

Ask a Lawyer,
Get an Answer ASAP!

Business Law
This answer was rated:

I was wonder what the best legal entity I should form. I'm

Hi, I was wonder what...
Hi, I was wonder what the best legal entity I should form. I'm looking to immediately form a business to provide First Aid/CPR training. I would have a couple of people (also instructors), teaching classes independently, but paying me a fee to use the company name and equipment.I also would like to have a business for real estate activities. Is it better to form two separate businesses or one, with "sub" businesses under the same umbrella? Wondering which one is easier for tax purposes and for liability insurance.
Show More
Show Less
Ask Your Own Business Law Question
Answered in 5 minutes by:
9/11/2017
Richard
Richard, Attorney
Category: Business Law
Satisfied Customers: 55,999
Experience: 32 years of experience practicing law and a businessman.
Verified

Hi! My name is Richard & I will be helping you today! It will take me a few minutes to type a response to your question. Thanks for your patience!

Ask Your Own Business Law Question

First, I would form a separate entity for each because the same reason you set up a limited liability entity to protect your personal assets, mandates that you set up a separate entity for each business...to prevent a problem with one business from contaminating the other.

Second, with respect to your choice of entity, there are several options.

The basic choices of limited liability entities are: 1) Limited Partnerships; 2) Limited Liability Companies; and 3) Corporations.

1) In a limited partnership, the limited partners have no personal liability for the debts and liabilities of the partnership, but the general partner does; that's why typically a limited liability is formed to act as the general partner. Partnerships are not tax-paying entities and their income and losses flow through to their partners.

2) LLC's are limited liability entities. They are typically taxed as partnerships with their income and loss flowing through to the members. None of the members are personally liable for the debts and liabilities of the LLC. They offer the same flexibility as a partnership in allowing for preferential allocations of income and loss.

3) Corporations can be C corporations or S corporation. They are both limited liability entities and the members do not have personal liability for the debts and liabilities of the entity. S corporations are taxed as partnerships with their income and loss flowing through to the shareholders. C corporations pay tax as an entity.

Finally, the big difference between corporations and LLCs is tax-related. A regular C corporation would probably not be your option due to the fact it's not a flow through entity and could create a possibility of double taxation for you. Both the LLC and the S Corp are limited liability entities meaning your personal assets would not be at risk for the debts and liabilities of your entity. And, both are "flow-through" entities for tax purposes...meaning that the entity does not pay taxes; rather the operations of the entities flow through to your own personal tax return. The LLC is more flexible as it allows for preferential allocations of profits and losses, but if you are a single owner, that probably doesn't make much difference. The LLC also is a bit less cumbersome administratively as your filing requirements. And, unlike an S Corp, the LLC is not required to have formal meetings and keep minutes of those meetings. The biggest issue with the LLC is that as the owner of an LLC, you are considered to be self-employed and must pay the 15.3% self-employment tax contributions towards Medicare and social security. As such, the entire net income of the LLC is subject to this tax. With an S Corp, if you work for the entity, you must pay yourself 'reasonable compensation.' Basically, the shareholder must be paid fair market value, or the IRS might reclassify any additional corporate earnings as 'wages.' Unlike an LLC, where you are subject to employment tax on the entire net income of the business, only the wages of the S-Corp shareholder who is an employee are subject to employment tax. The remaining income is paid to the owner as a 'distribution' which is either taxed at a lower rate or or not at all depending upon the particular facts. BUT, as shareholder, you must receive reasonable compensation. If you get greedy by paying yourself a lower salary with the resulting higher distributions, you risk the reclassifying your distributions as wages. Typically, the best solution is to form an LLC and then elect for it to be treated as an S Corp for tax purposes; this results in the best of both worlds...the flexibility of an LLC and the advantageous self-employment tax treatment of an S Corp. :)

Thank you so much for allowing me to help you with your question. I have done my best to provide information which fully addresses your question. If you have any follow up questions, please ask! If I have fully answered your question(s) to your satisfaction, I would appreciate you rating my service as Good or Excellent (i.e., 4 or 5 stars)(hopefully Excellent/5 stars!). Otherwise, I receive no credit for assisting you today. I thank you in advance for taking the time to provide me a positive rating!

Ask Your Own Business Law Question
Customer reply replied 4 months ago
Excellent! That was very helpful. One follow up. When do I elect to have the LLC treated as an S Corp? When I form the LLC or when filing my taxes?

When you form your LLC.

Richard
Richard, Attorney
Category: Business Law
Satisfied Customers: 55,999
Experience: 32 years of experience practicing law and a businessman.
Verified
Richard and 87 other Business Law Specialists are ready to help you
Ask your own question now
Customer reply replied 4 months ago
Excellent! Thank you, sir!

You're very welcome! It's been my honor and privilege to help you with this. If I can help you in any way in the future, I'll be happy to help. For easy access, my bookmark is: www.justanswer.com/law/expert-legalbeacon/ . Or, simply request “Richard only” in the first line of your question.

Thank you so much for the 5-star rating! I know rating takes an additional step and I truly appreciate you taking the extra time!

Ask Your Own Business Law Question
Ask Richard Your Own Question
Richard
Richard
Richard, Attorney
Category: Business Law
Satisfied Customers: 55,999
55,999 Satisfied Customers
Experience: 32 years of experience practicing law and a businessman.

Richard is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

Mr. Kaplun clearly had an exceptional understanding of the issue and was able to explain it concisely. I would recommend JustAnswer to anyone. Great service that lives up to its promises!

Gary B.Edmond, OK

My Expert was fast and seemed to have the answer to my taser question at the tips of her fingers. Communication was excellent. I left feeling confident in her answer.

EricRedwood City, CA

I am very pleased with JustAnswer as a place to go for divorce or criminal law knowledge and insight.

MichaelWichita, KS

PaulMJD helped me with questions I had regarding an urgent legal matter. His answers were excellent.

Three H.Houston, TX

Anne was extremely helpful. Her information put me in the right direction for action that kept me legal, possible saving me a ton of money in the future. Thank you again, Anne!!

ElaineAtlanta, GA

It worked great. I had the facts and I presented them to my ex-landlord and she folded and returned my deposit. The 50 bucks I spent with you solved my problem.

TonyApopka, FL

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

< Previous | Next >

Meet the Experts:

Infolawyer

Infolawyer

Attorney

1,851 satisfied customers

Experienced lawyer

Dimitry K., Esq.

Dimitry K., Esq.

Attorney

1,611 satisfied customers

Run my own successful business/contract law practice.

MShore Law

MShore Law

Attorney

1,233 satisfied customers

Drafted Negotiated and/or Reviewed Thousands of Commercial Agreements

RGMacEsq

RGMacEsq

Attorney

751 satisfied customers

Licensed Texas General Practice Attorney

Barrister

Barrister

Attorney

646 satisfied customers

17 years practicing attorney, JD, BA, MBA

Ely

Ely

Attorney

577 satisfied customers

Counselor at Law.

J.Hazelbaker

J.Hazelbaker

Attorney

393 satisfied customers

Experienced and trained in the area of business law.

< Previous | Next >

Related Business Law Questions
I have a question about corporate law. I am 50% shareholder
Second opinion] I have a question about corporate law. I am 50% shareholder in an s corporation. My business partner spends half of the year abroad. He is currently out of the country. Our business is… read more
Michael Bradley
Michael Bradley
JD
1,191 satisfied customers
I am in a limited partnership and all of the utilities are
I am in a limited partnership and all of the utilities are in my partners name. We have fuel cards for our trucks also. They are in his name. I own four of the 18 wheelers in the Fleet myself and my p… read more
Alex Esquire
Alex Esquire
Managing Attorney
Doctoral Degree
153 satisfied customers
Is there a rule which requires that a corporation (or LLC)
Is there a rule which requires that a corporation (or LLC) must have a lawyer in a civil case?… read more
Damien Bosco
Damien Bosco
3,353 satisfied customers
I have a C corporation the hold 7 apartments, me and my
I have a C corporation the hold 7 apartments, me and my partner want to open a new entity and transfer over half of the appartments so he can eventually stay with 3 and my 4. what would be the correct… read more
Legal Eagle
Legal Eagle
Attorney
Doctoral Degree
7,285 satisfied customers
We have an s corporation. In the shareholder agreement there
We have an s corporation. In the shareholder agreement there is a provision that the corporation must repurchase shares from minority shareholder when offered. Shareholder Agreement further states tha… read more
Roy Hadavi
Roy Hadavi
Attorney
Juris Doctorate
980 satisfied customers
Is a US C corporation owned by a foreigner treated as a
Is a US C corporation owned by a foreigner treated as a foreign person when the corporation sells real property in the US?… read more
PaulmoJD
PaulmoJD
Attorney At Law
Doctoral Degree
106 satisfied customers
California, privately held C Corporation, I own 100 shares,
California, privately held C Corporation, I own 100 shares, 100% ownership, of corporation and would like to issue 100 shares to my son, thus creating 50/50 ownership. What is the process (easiest) to… read more
Richard
Richard
Attorney
55,999 satisfied customers
Converting my llc business to a c corporation and looking
Converting my llc business to a c corporation and looking for a lawyer to sign the paperwork … read more
Richard - Bizlaw
Richard - Bizlaw
Juris Doctor
3,696 satisfied customers
I have C-Corporation company in California,USA. Currently my
Hi AllI have C-Corporation company in California,USA. Currently my business is software consultancy only. But going forward, I would like to perform business in selling few products (via dropshipping … read more
Ray
Ray
Lawyer
Doctoral Degree
30,828 satisfied customers
I have a limited partnership with the general partner
I have a limited partnership with the general partner interest being held by a trust. I am the only trustee. I want to turn the trust over to my daughter. My thought is to "appoint" her a trustee of t… read more
Damien Bosco
Damien Bosco
3,353 satisfied customers
My S corporation is a member of an LLC which has other
My S corporation is a member of an LLC which has other members in it as well. Can my S corporation be the listed manager of the LLC in Illinois? All the members agree to having the S Corporation as th… read more
RGMacEsq
RGMacEsq
Attorney
Doctoral Degree
751 satisfied customers
My friend has an existing C corporation in interior design.
My friend has an existing C corporation in interior design. Last year we decided to join forces we both took on an executive role in the corporation, hired a paycheck company and got to work. She agre… read more
Roy Hadavi
Roy Hadavi
Attorney
Juris Doctorate
980 satisfied customers
IS A "C" CORPORATION REQUIRED TO HAVE AN OPERATING AGREEMENT
IS A "C" CORPORATION REQUIRED TO HAVE AN OPERATING AGREEMENT WITH ITS SHAREHOLDERS OR OFFICERS?… read more
Richard
Richard
Attorney
55,999 satisfied customers
In State of Mississippi does a limited partnership
In State of Mississippi does a limited partnership automatically dissolve if the sole general partner resigns without giving the limited partners the required notice required under the limited partner… read more
PaulmoJD
PaulmoJD
Attorney At Law
Doctoral Degree
106 satisfied customers
In Colorado if an s corporation has no bylaws and there is a
In Colorado if an s corporation has no bylaws and there is a situation of possible left using a debit card by an employee and 20% shareholder does the State of Colorado use default bylaw and where can… read more
socrateaser
socrateaser
1,031 satisfied customers
In state of Alabama; A limited partnership contains
In state of Alabama;A limited partnership contains following provision:The limited partners may withdraw the general partner for no consideration upon 60 days written notice and general partner will t… read more
N Cal Atty
N Cal Atty
Doctoral Degree
59 satisfied customers
Can a managing member of a limited partnership also be a
Can a managing member of a limited partnership also be a limited partner … read more
Richard
Richard
Attorney
55,999 satisfied customers
Llc or s-corporation? I am a sole proprietor, mainly selling
Llc or s-corporation?I am a sole proprietor, mainly selling used merchandise online less than $100 K annually.I am considering to increase sales, and change business entity to llc or s corporation in … read more
Richard
Richard
Attorney
55,999 satisfied customers

DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.

The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).

DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.

The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).

Show MoreShow Less

Ask Your Question

x