I am trying to decide what is best to do. Fully incorporate or become an LLC? Any suggestions?

both are incorporated llc is deemed more for a partnership really all depends on what you are looking at as far as financial responsibility and tax issues kind of a hard question to answer i would look at the pros and cons of both filings and see which one works best for your business model

Well both have the benefit of removing personal liability! Unless you personally guarantee something for your company (co-sign).... then it is only for those debts that you guranteed.

With a corporation you will be double taxed unless you get S corp status. S corp status allows pass through tax treatment. At one time S corp was the only way for a small business seeking pass through taxes.... until LLC caught on.

An S corp and LLC have identical benefits. The advantage of an LLC is that you don't have to depend on the IRS to classify you as an S corp, you can distribute profits and losses in disprportinate amounts. The LLC was originally created by Wyoming to allow a more flexible legal entity.

Long story short: The LLC has all the benefits of an S corp without the rigid tax/legal requirements. IMHO, LLC is the only way to go nowadays.

I went with an LLC (Indiana). Also, an LLC can also be a single person entity in every state except Mass.

Originally posted by indyjon
IMHO, LLC is the only way to go nowadays.

Unless of course you want to enter the stock market :stickout

I was looking for this kind of answer. Thanks a lot indyjon :)

Originally posted by Ahmad


Unless of course you want to enter the stock market :stickout

I was looking for this kind of answer. Thanks a lot indyjon :)

True.... you would have to convert to a shares based entity. In that case then I would just form a Corp Holding company and then have the Corp "buy out" the LLC. I have noticed alot of public companies now hold ownership of multiple LLCs.

The issue is much more complex than anything said here....you must talk to both an attorney and an accountant to fully understand the differences. And, the definitions and treatment vary widely by state. For instance, in some states (example: Florida), LLC's get taxed for state purposes as a Corporation. Also, some states (example: Florida) do not recognize S Corporations for state income tax purposes. Just an example of the complexity.

There is not a reason for a sole proprietor to form an S-corp as long as single member LLCs get the same or better treatment. Of course that is just my own attorney's. To basically quote:

S-corp=hassle
LLC=less hassle

Also, just as Incognito says.... there are special circumstances for every situation and should consult your tax attorney rather than take anyone's opinion on the matter as the gospel.

The decision tends to get oversimplified in these threads, because income tax treatment of the profitable business is only one consideration. Other differences that might weigh in are the availability of tax-deductible fringe benefits, what tax liability will be if the business is sold, survivability of the business entity if the owner should die, the means by which a second or subsequent owner might be brought on board in the future, deductibility of business losses, etc.

It just surprises me that so many people who frequent this forum think that it's always a black and white, simple decision and that the many thousands of smart, educated people who on the advice of their accountants and lawyers are choosing to form S- or C-Corporations are obviously wrong.

The bottom line is that nobody should think they can know what legal form someone else's business should take without knowing not only all of the ins and outs of the law and tax codes, but also the long-term goals and lifestyle priorities of the principals involved.

heres one more thing to consider...

When i was deciding whether to from an S-Corp, or an LLC, I went around and asked a lot of people, including people i didn't know, what their thoughts on an LLC are...

In most cases people either didn't know what an LLC was, or they told me that an LLC doesn't sound "trustful". They usually pointed out the wording "Limitied Liability" as sounding like the LLC is not willing to commit 100%.

All things being equal, most of the people I asked said they would do business with an S-corp, before an LLC. They said "corporation sounded more official than LLC". Personally, I dont think most people know that an s-corp and corp are different, so to them s-corp = corp. I use this to my advantage. I think it makes me sound "bigger" than i really am.

Anyway, this was a very informal "survey" i did for my own personal reasons. take it for whatever you feel its worth...

In the end, these results alone did not lead to my decision to go with an s-corp, but they did play a small role.

I think some of you are making it more difficult than it is.... as I said earlier these are just my opinions and everyone should consult their tax attorney.

wwwgeek... re: your thing about LLC being less trustworthy. You may have been able to avoid that "perception" by registering a an assumed name, which most folks do anyway.

Also... you can't truely form an S-corp. You form a Corp and then ask the IRS for an S-corp designation.

JayC... the issues of survivability, sold, bringing in new owners.... etc etc are much more flexible in an LLC via the Operating Agreement. In an LLC you can also dispproportiantely distribute profits and losses. The LLC has surpassed the Corp as the most formed entity in most states.

One other item of interest with an LLC you are not required to have regular meetings, Boards, Officers... etc etc. So for "most" single person small business entities an LLC is the easiest and most flexible route to take.

But as always you should do your own Due Diligence as well as consult your tax pro.

Originally posted by indyjon
I think some of you are making it more difficult than it is.... as I said earlier these are just my opinions and everyone should consult their tax attorney.Perhaps it's not clear from my last post, but I wasn't referring specifically to you or specifically to this thread. In general there's a tendency for people here to make blanket recommendations on this complex issue that usually come down to "this is what I did, and I'm sure it was the right thing for me, so it's right for you too."

Heck, it's not even just on this issue; maybe it's human nature. People buy a particular car, they want to convince everyone else that it's the best car... people use a particular web design or graphic program, and they want to validate the choice and convince everyone else that it's the best thing for them too.

But in the incorporation discussions at WHT specifically, it also gains momentum: many people saying "form an LLC, it's always best for a single operator" (which, see below, I know isn't exactly what indyjon is saying here) encourages more and more people who haven't put any independant thought into it to say the same thing... and that brings people to take that step without thinking it through. And could lead some people into taking what might not be the best route for them. Why do I care? I don't know; I'm just a nice guy I guess.

Also, in the midst of people expressing their opinions often some misspeaking of fact creeps in. For example:the issues of survivability, sold, bringing in new owners.... etc etc are much more flexible in an LLC via the Operating Agreement.Other than, perhaps, some amount of flexibility in how to bring in new owners, all of the issues I cited are covered either by corporation law or tax regulations; you can't change them. For example, nothing you write in your Operating Agreement can change the amount of allowable tax deductible fringe benefits, or the distribution of tax liability if the business is sold. Nothing you write in your Operating Agreement can change the fact that if you are the only member of your LLC, it dies when you do. A corporation will survive without you. That may or may not be important to anyone's situation (which was my point about having to know the long-term plans and priorities) but the point is that it may be a consideration, and that there are real and concrete differences between a standard corporation and an LLC that might legitimately lead someone, even an individual owner, to choose the corporation as a form.

I find myself writing about this topic a lot here, and for one reason: I find a lot of advocacy, a lot of people blending their opinions with inaccurate reporting of fact in order to strengthen a position they're staking out; and it's usually on the side of those arguing the strength of the (certainly strong) LLC. I'm not advocating one or the other, just pointing out that there are advantages to the S- and C-Corporation in certain circumstances and it those forms shouldn't be dismissed out of hand.The LLC has surpassed the Corp as the most formed entity in most states.A spurious argument. The relative popularity of any given form has no bearing on it's appropriateness in any given circumstance.wwwgeek... re: your thing about LLC being less trustworthy. You may have been able to avoid that "perception" by registering a an assumed name, which most folks do anyway.I suspect that his point was that having "Incorporated" in a name would, in the eyes of some people, imply more respectibility than would "LLC." That's probably true, but it's becoming less true as the LLC form is becoming more popular and people are becoming more used to seeing it used by "legitimate" businesses. To the extent that it is true, though, an assumed name wouldn't help; since you can't put "Incorporated" into your dba.So for "most" single person small business entities an LLC is the easiest and most flexible route to take.

But as always you should do your own Due Diligence as well as consult your tax pro.Agreed, on both counts.

JayC.... I agree with you on most counts. Except when I die my LLC won't... I am writing in the will to leave it to you. HaHa

But seriously, my wife also signed my Operating Agreement on the advice of attorney. This way the company can continue to operate without me if she choses. This also protects the company in the event of divorce..... Former spouses who suddenly become members by way of a divorce decree can not be mailicious.

Not to beat a dead horse.... but in case someone searches the forum and lands here. I stumbled on a nice little resource for state and local info on businesses.

Here it is: http://www.bankrate.com/brm/news/biz/Green/states/states.asp?prodtype=biz

Cheers!