Tax and incorporation Issue: What Format Should I use?

From personal experience I would not do a C Corp. I would do either an S Corp or LLC. I'm thinking of switching to an LLC.

A C Corp is for those that do a lot of volume, have stockholders, and plan to go public someday. The C Corp is taxed, then any dividends passed on the the shareholders is taxed. If there is a loss, it is not deductable by the shareholders even if there is only one.

An LLC and S Corp allow the revenue to be taxed once on the owners taxes. They are pass through enitities so that losses are passed on and can be deducted. Both offer protection against personal law suits to some degree. As long as you keep funds seperate and don't comingle things with your personal money mostly. Don't buy bread with the business cash and don't buy office supplies with your own cash. Keep seperate books and keep the minutes and corporate papers up to date. Nothing will protect you personally if you do something illegal or direct the business to do something illegal.


I would go with an LLC personally.






DISCLAIMER: This post does not and is not meant to give legal advice. I am not an attorney and we have no attorney client relationship. If you use any of the information imparted by this article, you do so at your own risk and I strongly urge you to consult your attorney. The information presented is my opinion only which may not be correct for your situation.

I'm not an accountant or anything...but I have formed many LLC's over the years so here is my input.

1) It is so, so easy to do. Legalzoom charges like $400 for this and all you really get is a fancy notebook.

Most states now have an online form you can fill out, pay a small fee ($25 - $50) and you are done. LLC formed. Just search a little and eventually you will find it when you get through all the services that want you to pay them.

If you can't do it online...ALL states will have a form you can print out, complete and mail in and you are done.

2) The next step is to get an EIN. Again....some services will charge you $100 or more to do this. No need!

Go here: Employer ID Numbers (EINs)

You can apply for the EIN online and have it done in minutes. Easy, easy, easy.

3) Take the documents and get a business account set up.

Seriously, this stuff is so, so easy. Don't ever work as a sole proprietor. You are causing yourself headaches trying to keep it all straight.

As far as taxes go, a few more tips:

Keep your accounts separate. Never mix your business and personal expenses. With your business account, never pay a personal expense.

This is the quickest way for the IRS to say you and your LLC are the same entity and dissolve your company, charging all the income to you personally.

So, make sure your business charges are business, no quick trips to the grocery store with company money.

If you need the money for something, transfer it to your personal account first, then you will pay taxes on that money since it is income.

Sure, get some advice, but it is so simple I don't bother anymore. I use an accountant for my annual taxes and that is it.

I have even set up multiple LLC's for separate projects. There is no limit on how many you can have. For example, I may have a marketing project...let's call it Sweet Marketing Project.

That project may have several components so I would form an LLC for each component: Sweet Marketing Project 1 LLC, Sweet Marketing Project 2 LLC, Sweet Marketing Project 3 LLC.....and so on.

This keeps everything separate and protected in case you end up getting sued by a client or another business. Only one LLC gets burned. In which case you close it down and keep the rest going.

Get it done!

Daniel