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  1. #1
    Join Date
    May 2001

    Corp or LLC in CA

    Hi guys,

    For those of you who are in California ..

    What would be the best choice here, corp or LLC. I know LLC would be the best way to go .. but a minimum $800 annual fee is a little steep for a small startup company. I'm confuse on which to choose ..

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  2. #2
    Join Date
    Aug 2001
    It would be best to talk to an accountant for which solution would be best for you. I believe that when you incorporate you will have to pay the $800 yearly tax as it is a franchise tax and it doesn't matter whether you are an LLC, INC, LLP, etc...

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  3. #3
    Join Date
    Nov 2002
    Northern California
    An LLC would be cheaper, even with the 800 yearly fee, because you can structure an LLC to be a pass-through, so the LLC itself doesn't pay taxes. The individual members of the LLC would pay taxes though.

    - Daniel

  4. #4
    For starting up, it is probably best just to be a sole-proprietor (no fees, except for a Fictional Business Name which is $20).
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  5. #5
    an s-corp would do pass through too
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  6. #6
    Join Date
    Apr 2002
    Yeah I never understood what the point of the S-Corp was. Seemed like an LLC with an Inc. after it. However, rather than declaring profits to the IRS as with an LLC, in an S-corporation you just sign off for the pass-through each year provided you meet the requirements.

  7. #7
    Join Date
    May 2002
    Starting a business and not have $800 in cash to pay for the fees sounds like a bad idea to me. Maybe Benjamin is right a sole-proprietorship sounds like a good idea.
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  8. #8
    Join Date
    May 2001
    When you do sole proprietorship do all of your company earnings go into your personal income tax?

  9. #9
    Join Date
    Jul 2001
    St. Louis

    LLC vs S Corp

    If you are thinking of incorporating, you definately want to go S Corp, it too is a pass through organization.

    LLC is also a pass through. Typically if you have few shareholders (owners) an LLC has fewer restrictions. The biggest difference is an LLC limits the number of owners. Not a big deal if you aren't going for venture capital.

    You can always move from an LLC to an S Corp but you cannot go from an LLC to an S.

    Check with your accountant as to which one is better, my bet is they will say LLC unless CA has some strange laws requiring extra fees they don't get in an S Corp. Both are pass through organizations meaning the income (profit) you earn will be taxed on your own tax return.

    Legally, they both offer similar protections.

    It would be worth an hour of your accountants time to figure out what is best for you in your state and your specific situation.
    Brad @ Xiolink
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