LLC or Incorporated?

16 years ago

Went for LLC... cause that was the only option here in Hong Kong (no such thing as C-Corporation, S-Corporation)

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Carl DiNello 16 years ago

If you have all types of Corporate options available to you, here is a guide that may be helpful when deciding:

Issue - Limited Liability for Owners

C Corp - Yes
S Corp - Yes
LLC - Yes
Partnership - No
Sole Proprietor - No

Issue - Double Taxation of Income

C Corp - Yes
S Corp - No
LLC - No
Partnership - No
Sole Proprietor - No

Issue - Tax Treatment of Owner's Fringe Benefits

C Corp - Good
S Corp - Poor
LLC - Poor
Partnership - Poor
Sole Proprietor - Poor

Issue - Ability to Choose Tax Year

C Corp - Yes
S Corp - Limited
LLC - Limited
Partnership - Limited
Sole Proprietor - Limited

Issue - Transfer of Ownership

C Corp - Easy
S Corp - Easy
LLC - Easy or Difficult (by choice)
Partnership - May be difficult
Sole Proprietor - May be difficult

There may be some varience depending on where you live, so be sure to check with your local tax office (country, state, etc.).
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- LB 16 years ago
  
  You really need to talk to a good business lawyer.
  
  Case laws in each state may affect what is best for you, and it also depends on your income level.
  
  I met with my lawyers and accountant before deciding and was apprised of a some things I had not considered before.
  
  Also keep in mind, the S and C corps require more "paperwork" and formalities although it's really not that bad as long as you're aware of what needs done.
  
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- truhomebiz 16 years ago
  
  Thank you for this post. I have not considered any of this before and will look into it now.
  THANKS
  
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Daniel E Taylor

16 years ago

I suggest you thoroughly research S-Corp and LLC.

I have use LLC for my partnerships, and in the process
of opening a S-Corp for another business.

S-corps take alot more paperwork and organization than
LLC which is basically cut and dry forms.

If you are going with LLC its a very good idea to have a
lawyer write your articles of organization and tell him
what you need.

LLC's have many holes and good lawyers can prove in
a lawsuit that you and your LLC act as one and then
they can snatch your personal assets. So you have
to really be careful and go by the book with LLC's.

Daniel

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Noah Fleming

16 years ago

I'm in Canada, my online marketing businesses are incorporated under one umbrella business.

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Josh Anderson

16 years ago

Definitely S corp.

You pay more tax in an LLC because it is all passed through. There are no dividends.

Also LLC can leave you open for unlimited personal liability if you do not properly remove your personal relationship from it. For example if you use your own SS number in your LLC or if you do not manage your business finances separately form your personal.

Many people get lax on keeping their personal and business dealings separate when in an LLC because everything gets passed through anyway.

The best solution for you will depend on the type of business you are running and it may be smart for you to contact a business attorney and tax specialist as you make your decision.

But if I were looking at LLC or S corp by default I would do S Corp.

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LB

16 years ago

Originally Posted by Josh Anderson

Definitely S corp.

You pay more tax in an LLC because it is all passed through. There are no dividends.

Also LLC can leave you open for unlimited personal liability if you do not properly remove your personal relationship from it. For example if you use your own SS number in your LLC or if you do not manage your business finances separately form your personal.

Many people get lax on keeping their personal and business dealings separate when in an LLC because everything gets passed through anyway.

The best solution for you will depend on the type of business you are running and it may be smart for you to contact a business attorney and tax specialist as you make your decision.

But if I were looking at LLC or S corp by default I would do S Corp.

This is pretty much spot on, but it can depend on your income and expenses.

For example, health reimbursement plans under S corps require the income to be "passed back" and reported as income on your W2. So medical expenses can be written off by the corp but will be income on your W2. Under an LLC the entire amount can be written off as an expense with the properly prepared health reimbursement plan. Makes no sense, I know.

It can get tricky quick...

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Lance K 16 years ago

Originally Posted by Josh Anderson

Definitely S corp.

I concur!!!
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- vorales 16 years ago
  
  Guess A Professional Business Lawyer or Chartered Accountant would advice you better:
  
  1) What would be the nature of your business?
  2) How much revenue you would be generating?
  3) How much profits you are estimating?
  4) How many people you did be employing?
  
  He might make a provisanal profit and loss a/c and the balance sheet for you so as to ascertain for you that how much taxes you got to pay under what registration of your company LLC or INC.
  
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Stallion 16 years ago

Originally Posted by Noah Fleming

I'm in Canada, my online marketing businesses are incorporated under one umbrella business.

I know this is sort of a little off from the OP, but I was curious about the difficulty of incorporating in Canada. I've registered a sole proprietor before and it was easy. It took 5 minutes to fill a few blanks on a sheet a paper. Than I paid the standard fee.
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narsticle

Banned 16 years ago

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naruq 16 years ago

You want to get advice from excellent lawyer. Your circumstances may be different from other business owners on this forum.
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Josh Anderson

16 years ago

LLC because its easy

Even though you may pay an additional 7% or more on your personal taxes on some of your income?

Easy can be expensive.

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enoorth

16 years ago

I prefer s-corp because all income after expenses from an LLC pays FICA taxes and an s-corp can pay me a dividend without FICA so long as my salary is reasonable.

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Josh Anderson

16 years ago

For example, health reimbursement plans under S corps require the income to be "passed back" and reported as income on your W2. So medical expenses can be written off by the corp but will be income on your W2. Under an LLC the entire amount can be written off as an expense with the properly prepared health reimbursement plan. Makes no sense, I know.

Yes, so far that is one of the drawbacks to small business owners running corps.

Although you can have a health policy for employees as long as you provide the same benefits to all employees.

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Chris Lockwood

16 years ago

I don't know why so many people go for S corps- they really aren't that great for most small businesses.

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LB 16 years ago

Originally Posted by Chris Lockwood

I don't know why so many people go for S corps- they really aren't that great for most small businesses.

Elaborate on that?

I can think of numerous reasons why they are better, as Josh has mentioned.

In addition, if the state you're incorporating in has a habit of "piercing the corporate veil" as mine does, then an LLC is often bad news.

Not to mention that by taking some income as a dividend one can save thousands in self-employment taxes with an S-corp.
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LLC or Incorporated?

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