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LLC or Incorporate?

by drooblez
15 replies
Hey guys,

I am looking to incorporate my internet business or form an LLC. A certain individual was talking to me about my business and said that if someone was to sue me and they won, they could (basically) take everything I own...

Where as if I was incorporated or had an LLC, then they could only take the business. On top of that, I would get some type of tax benefits.

I asked which would be better... to get incorporated or form an LLC. He said that an S-corporation would be best since I will not own any property.

I just wanted to check with any of you... Do you have more information about this? What do you think? Is it best to form an S-corp instead of LLC since I do not own property? He said I pretty much get equal tax benefits out of both types but an S-corp would be better since I don't own property... so what is your opinion?

Thanks a lot for your help!
#incorporate #llc
  • Profile picture of the author Scott Voss
    Hi there Drooblez,
    I personally went with an LLC with the S-corp designation, which allows good protection with the extra tax advantages.

    There are definite advantages for me to go the LLC route. However, regardless of whatever anyone says on this forum, unless they are a tax/corporate attorney in the State you are going to incorporate in, then you need to take it with a grain of salt.

    I HIGHLY recommend that you talk to the good folks over at Keyt Law. This guy is the top Arizona LLC attorney in the State. I cannot say enough good things about him or his team.

    They helped me with the process of selling off one of my businesses to my business partner and also set up my current LLC.

    If you do work with them, please tell Katy that I said hi!

    Good luck,
    Scott Voss
    Patronus Marketing, LLC
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    • Profile picture of the author John Williamson
      LLC and opt for S-corp taxation if you bring in alot of revenue. If you don't opt for S-corp, the LLC is considered a 'disregarded entity' by the IRS so you use the same 1040 form (individual tax return). The S-corp makes things complicated but saves you a good bit in self-employment taxes - only worth the hassle if you bring in a lot like I said.

      I downloaded the forms for free online and sent them, along with a check, to the secretary of state's office. Whole process took about 15 minutes. Incorporate if you plan to have a large, full-scale, professional business with employees and everything. The LLC separates you from the business, so you are not liable for it's debts, hence the term limited liability company.
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  • Profile picture of the author drooblez
    Scott,

    Thanks for your reply! Your information was extremely helpful!

    I've checked out the Keyt Law site and he definitely looks good. May I ask you how much you paid Keyt Law to form your LLC with the S-corp designation? You can send me a PM if you would not like to post it publicly...

    On a side note, I see you do local marketing as well . I'm right there with you, in Phoenix as well!

    Thanks again!
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    • Profile picture of the author Scott Voss
      Absolutely. The cost for the formation was $600.

      This is a little more expensive than if you went some other routes, but for me I think it was worth it. They were quick, efficient and friendly throughout the whole process.

      But more importantly, I learned a lot about how you NEED to set up your business when I went through the process of selling off the other business to my business partner.

      We went the cheaper route with that business (through a local CPA). We were very happy with that persons work until we had to shell out several hundred dollars to get everything straight.

      Good to see another Phoenician here! Aren't you just loving this turn in the weather? I can finally take my dogs out for a walk without risking heat stroke!!

      -Scott

      Originally Posted by drooblez View Post

      Scott,

      Thanks for your reply! Your information was extremely helpful!

      I've checked out the Keyt Law site and he definitely looks good. May I ask you how much you paid Keyt Law to form your LLC with the S-corp designation? You can send me a PM if you would not like to post it publicly...

      On a side note, I see you do local marketing as well . I'm right there with you, in Phoenix as well!

      Thanks again!
      Signature
      Get My FREE Report on Getting Clients for Your Offline Marketing Business [No pesky opt-ins!!]

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  • Profile picture of the author drooblez
    Hey John,

    Just posted as you made your new post!

    Your post was also very helpful! I definitely plan on staying small. I do have consistent workers in India and the Philippines that I pay for some tasks, but no "employees" in the United States.

    You mentioned the S-corp taxation would only be good if I bring in alot of revenue. What is your definition of a lot of revenue? Over $50K? $100K?

    Thanks!
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    • Profile picture of the author J Bold
      Originally Posted by drooblez View Post

      Hey John,

      JI do have consistent workers in India and the Philippines that I pay for some tasks, but no "employees" in the United States.

      Those are not your workers, they are independent contractors, for the sake of real business talk.

      LLC IS incorporating, hence the last word, Limited Liability "Corporation." At least, that's how I look at it.

      But, yes, a lot of people say to form an LLC but get taxed as an S Corp.

      I've heard that Nevada LLC's are best, as they give the most protection to your business, but you'd have to research that on your own, and it would possibly add more expenses to your whole setup.
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  • Profile picture of the author BizmanJoe
    Hey Scott,

    Thanks for your post. I have reviewed the site and find it quite informative, not to mention Katy (the blonde) is a real hottie ;-). I will likely use their services to incorporate.
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  • Profile picture of the author sweety4
    Can you tell me, what is LLC? What is the use of LLC?
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    • Profile picture of the author Joe Mobley
      Originally Posted by sweety4 View Post

      Can you tell me, what is LLC? What is the use of LLC?
      That would be a Limited Liability COMPANY.


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  • Profile picture of the author drooblez
    @ redicelander:
    Ok, they aren't my workers, but I use them on a consistent, daily basis. To be politically correct, they are independent contractors like you said.

    @ Scott Voss:

    Thank you for that information! And yes, I am loving how the weather is starting to turn out. It's getting a little cooler outside which is very nice and I can get into my car without feeling like I'm sitting in oven!

    @ sweety4:

    LLC is Limited Liability Corporation... You use an LLC to protect your business and yourself, along with tax benefits. This may help you out: Limited liability company - Wikipedia, the free encyclopedia
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  • Profile picture of the author DreamShaper
    Originally Posted by drooblez View Post

    Hey guys,

    I am looking to incorporate my internet business or form an LLC. A certain individual was talking to me about my business and said that if someone was to sue me and they won, they could (basically) take everything I own...

    Where as if I was incorporated or had an LLC, then they could only take the business. On top of that, I would get some type of tax benefits.

    I asked which would be better... to get incorporated or form an LLC. He said that an S-corporation would be best since I will not own any property.

    I just wanted to check with any of you... Do you have more information about this? What do you think? Is it best to form an S-corp instead of LLC since I do not own property? He said I pretty much get equal tax benefits out of both types but an S-corp would be better since I don't own property... so what is your opinion?

    Thanks a lot for your help!
    You definitely need some professional business advice.

    Going direct to lawyers can be expensive though.

    If cost is an issue .. You may want to check out any reputable small business groups who may provide friendly knowledgeable forums AND even low cost legal and tax advice from professionals. I am UK based not US so cannot identify for you any such business groups. Here I am a member of the Federation Of Small Business which membershp gives me access to tax and legal help lines I can and have asked a lot of basic questions of.

    Anyone here know any such organizations stateside?
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  • Profile picture of the author AlphaWarrior
    Both incorporation and LLC will limit your liability if something bad happens. As to which will work better for you, it depends on your state's laws. In my state, at first incorporation was better, but now laws have changed and an LLC is as good as an incorporation. Check with a lawyer as to which my be best for you. Also, do not be afraid to call several lawyers. You can probably find one who will talk with you free of charge - and his/her advice is as good as a lawyer that charges you to talk with you. The free consultation is to build to a relationship and trust and in hopes of getting business in the future - basic marketing.
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  • Profile picture of the author DubDubDubDot
    Originally Posted by drooblez View Post

    I am looking to incorporate my internet business or form an LLC. A certain individual was talking to me about my business and said that if someone was to sue me and they won, they could (basically) take everything I own...
    In certain cases it is more difficult for a one man show to hide behind the veil of an LLC than a larger business were it's owner has a buffer zone of employees between himself and the plaintiff. I'm not a lawyer, so that was not ideal wording but you get the point.

    In other words, if you operate an LLC tucking company alone and you drive through a red light and kill someone, expect to be named personally. Whereas if that was an employee of yours, it is more difficult to get at you personally since you played no role in the incident.
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    • Profile picture of the author Joe Mobley
      Originally Posted by DubDubDubDot View Post

      In certain cases it is more difficult for a one man show to hide behind the veil of an LLC than a larger business were it's owner has a buffer zone of employees between himself and the plaintiff. I'm not a lawyer, so that was not ideal wording but you get the point.

      In other words, if you operate an LLC tucking company alone and you drive through a red light and kill someone, expect to be named personally. Whereas if that was an employee of yours, it is more difficult to get at you personally since you played no role in the incident.
      Let me respectably disagree.

      Employees do not provide civil buffers.
      In the example mentioned above, any private or business property OUTSIDE the LLC is not at risk.

      But right or wrong, the better point would be to contact an attorney who specializes in setting up LLC's and corporations.

      Hope this helps.


      Joe
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