PDA

View Full Version : Corporations Vs. LLC



osuman
09-15-2005, 02:45 PM
Hey guys this is my first post,

I had a question I am looking to start a business, in the long term it is meant to be just a tax shelter, however, later on that may change. My question is should I form a corp or a LLC? I know that LLCs are typically cheaper and easier, however, are there any tax advantages I will be losing? Also will creditors see the LLC as its own entity or will its credit be tied to myself.

Thanks in advance guys

Jackie

Enchantment
09-16-2005, 05:37 PM
Offshore Incorporations is one way to protect yourself from heavy taxes... incorporate your LLC in an offshore jurisdiction. LLC means limited liability company... this in itself spells out that the company is its own entity.

DrColorChip
10-28-2005, 07:16 PM
There's not much of a difference between the corp status vs LLC, though the paperwork may be a little easier for an LLC. You're not going to get any better credit using either since it will be based on your personal credit until you develop some with the company. The IRS doesn't look fondly on a company being created for the sole purpose of being a tax shelter, so I'd be careful.

protodea
11-16-2005, 06:16 PM
I would go with the LLC. I have in the past and it actually gives you better tax advantages than the Corp. Corporations are taxed twice, once at the corp level and again at the individual level when you take money out. LLCs don't work that way you only get taxed once. If you need any help let me know.

MrRick
12-11-2005, 09:57 PM
Would an S-corp not be an option either? They also save you from getting taxed twice.

ApylSoft
12-12-2005, 12:59 AM
In a one member LLC, IRS gives option to file as an individual, partnership or corp. Please confirm at IRS website. Also, in some cases, I believe it will be little difficult to get funding becuase LLC is lesser knows business entity.

faeriebell
12-20-2005, 10:14 AM
I don't agree that LLC is "lesser known". It's certainly a newer form of organization but it's by no means little heard of. Wal-Mart.com is an LLC.

I would suggest organizing as an LLC for the above mentioned tax benefits. LLCs are good because they protect the investors, in that if the business fails, creditors will only be able to get what you put in the business, ie. not your personal assets.

Always consult a lawyer if you have specific questions.

BusinessAmbassadors
12-23-2005, 06:32 AM
I think it's great you're starting a business - Welcome.

An LLC (Limited Liablity Company) was made for businesses and real estate investments. It's provides you and your business with great protection.

When you're a Member of an LLC the liablity of the company stays with the company not the Members (Owners).

Were in a Corporation the Offices who act like owners are the employees and hold all the liablity of the Corporation.

So unless you're planing to sell stock in your Corporation and want to go public an LLC is a great protection tool for any business.


[Edited: Reason = removal of advertising and link]

Maverick
02-01-2006, 04:21 AM
First, I DON"T suggest an offshore entity for tax savings unless you really know what you're doing. That can be called tax evasion if done inncorrectly, not the legal Tax Avoidance you desire. You'll be a candidate for a white suit with black strips. Offshore entities can be effective for Asset Protection, but there are still pitfalls to this approach, and serious legal issues.

As far as your legal structure of choice, it depends on several factors, of which we don't have the facts to provide you with a qualified answer. You mentioned you needed a tax shelter. The best structure you should select is predicated on the amount of income you plan to make and what the business does and how it operates.

Will you need to raise future capital through investors? This is one consideration. Will your company make in excess of $150 K per year? If yes, an LLC may not be the best course. If under that amount, it probably will be the best choice, since it has some of the benefits of a corporation (for liability protection), and the benefits of a partnership (for beneficial tax purposes).

Whichever way you go, I suggest your purchasing a book on forming corporations or LLCs by Anthony Mancuso. His books are the best and can pretty much keep you on track through the setup process. The books are for education, enabling you make informed business decisions.

In most states, you can setup your corporation or LLC online in 20-30 minutes. It's a simple process (the filing part). The install process (Bylaws, resolutions, minutes, etc, are what is called the Install process-covered by the book).
Regards,
Maverick

muse
02-25-2006, 03:52 PM
I agree with Maverick. Before I made any determination, I would have a long talk with my lawyer and accountant.

Grant
03-28-2006, 11:43 AM
Hi guys.

Another option is to form a LLC, and then elect to have it taxed as a full fledged corporation. Then you can elect to have it treated as an S-corp. My accountant told me about this option and it seems to work pretty well.

The difference between the C-corp and the S-corp is that the S-corp election allows your finances to be passed through to your personal income taxes. Your S-corp will still file a return, but it won't pay taxes. The taxes the company will pay are passed through to your own personal tax assesment.

There is a big advantage of having your LLC taxed as a S-corp. In a straight LLC, all of the profit the company makes is taxed a the "self employment" rate, regardless of whether you take the money out of the company or not. So not only are you paying taxes as an employee, you are also paying the companies half of those same taxes.

What the S-corp election does is to allow you to take distributions on top of your salary. These distributions are only taxed at the employees rate, half the self employment tax rate, if you will. So you are still paying roughly 15% in taxes on your salary, but you're paying half of that on your distribution.

Now, the catch is that you can't take a $100 salary and a $10,000 distribution. The IRS will know you're trying to get around paying taxes and slap you with paying the additional tax on the $10,000 AND penalties.

What is the breakdown of how much you can take as a salary vs. a distribution? The IRS won't say. You have to be able to justify the ratio to the IRS.

Ask your accountant about this option, because there is less paperwork in forming an LLC, and you can have the advantages of an S-corp all in one!

Be sure to talk to an accountant and an attorney to discuss your specific situation.

elmonstruo
05-03-2006, 02:36 AM
There's not much of a difference between the corp status vs LLC, though the paperwork may be a little easier for an LLC. You're not going to get any better credit using either since it will be based on your personal credit until you develop some with the company. The IRS doesn't look fondly on a company being created for the sole purpose of being a tax shelter, so I'd be careful.

whoa there sport!! Why would you use your own personal credit for your LLC or Corp? This is not needed and should almost never be done. You can develop large Credit Lines under your Corp. or LLC seperate from your personal Credit very, very easy.

sbatz72
02-09-2014, 01:39 PM
When I was thinking of starting a vending machine business, I spoke to a lawyer and he told me that an LLC was the way to go. He explained it was the way to go if you did not want to be the one held liable for everything that could go wrong in a business. If you own a corporation, the owner(s) are solely reliable for anything that goes wrong in that business.

TomRalphio
03-27-2014, 08:46 AM
Well getting an LLC is a bit easier to set up, and the credit may be a bit better and you'll have better protection if things don't go as desired.
But be careful about setting something up just as a tax shelter, though. It's generally frowned upon by the IRS. And the last thing you want is to be looked at for tax evasion. I'd consult with a qualified legal representative and an accountant, as suggested above.

SBFO91
11-25-2014, 12:03 PM
Definitely discuss with a lawyer just be sure. However, Maverick made some solid points the legal structure.

Daniel Jameson
04-23-2018, 05:03 AM
Choosing to incorporate or form an LLC is an important decision. We suggest that you take your time making this decision and if necessary, consult with an attorney or accountant.

This is probably one of the most common questions many small business owners ask when they are looking to incorporate. You definitely should consider the advantages of both a corporation and a limited liability company (LLC) and which one is better for your company when incorporating.
Though both corporations and LLCs can help protect personal assets from business debts and any potential lawsuits or judgments made against your business entity, a corporation and LLC still different in a number of ways.

Here are just a some of the ways in which the structures differ from one another.
Advantages of an LLC
unlimited number of owners
profit and loss are “passed-through” to the individual owner’s for tax purposes
no annual meetings or minutes requirements

Advantages of a Corporation
can issue shares of stock to attract investors
splitting of corporate income may reduce overall tax liability

Disadvantages of an LLC
cannot engage in corporate income splitting to reduce tax liability
cannot issue stock

Disadvantages of a Corporation
double taxation of corporate profits and shareholder dividends
required to hold annual meetings and record minutes
S-Corporations are limited to 35 shareholders

zeeshan786
02-08-2019, 04:19 AM
"LLC" means "restricted obligation organization." ... Both LLCs and partnerships are framed by documenting shapes with the state. Both shield their proprietors from risk for business commitments. Be that as it may, they are diverse in the manner in which they are claimed, overseen and burdened, and they have distinctive recordkeeping and announcing prerequisites.

hanif.anze@ldaho.biz
07-27-2019, 10:13 AM
Hey guys this is my first post,

I had a question I am looking to start a business, in the long term it is meant to be just a tax shelter, however, later on that may change. My question is should I form a corp or a LLC? I know that LLCs are typically cheaper and easier, however, Speed Test (https://testmyspeed.onl/) Scrabble Word Finder (https://scrabblewordfinder.vip/) Solitaire (https://solitaire.onl/) are there any tax advantages I will be losing? Also will creditors see the LLC as its own entity or will its credit be tied to myself.

Thanks in advance guys

Jackie

LLC means limited liability company... this in itself spells out that the company is its own entity.

AarushiAashi
05-03-2021, 01:40 PM
By and large, most business people decide to shape a Corporation or a Limited Liability Company (LLC). The fundamental distinction between a LLC and an organization is that a llc is claimed by at least one people, and a company is possessed by its investors. It additionally gives restricted responsibility assurance.