Starting LLC or S Corporation

I am thinking about starting an LLC or S corporation... have any of you had any experience with this? Which site did you use to register your corporation?

 

Just formed an S corp through mycorporation . com . Pretty smooth, had to fax some signed paperwork into my state treasury. They pretty much filed everything else. Cost about 500 bucks. I would talk to an accountant or attorney as to benefits of a LLC vs S Corp. We invested in the latest copy of quikbooks to make taxes simple. No employees right now, just owners getting the company going, saves on payroll taxes. We will probably shift into employee payroll in about 4 months if our programming contracts go well.

 

There are benefits of each. From my experience taxwise the LLC worked out better for me but it varies from state to state as well as your city. Additionally, LLCs have more restrictions for registration than S corps so check if you can register as an LLC.

 

I went through the same thing in April. I actual went to a lawyer, was a family friend, to get this completed.

He recommended that I start an S-Corp. (So you know the reasons he recommended this, incase they pertain to you)

1) I was going to be the sole shareholder
2) I plan on being the only employee. -- Because of this the S-Corp was setup in a way where I do not have to have annual meeting, etc like other corporations do
3) With an S-Corp, the profits pass through to you personally (the shareholders). Because of this, with S-Corps you are not "Double-taxed" as you are with a regular corporation.

I HEARD that there is more paper work with LLC's too.

Hope this helps.

 

All of those things are also possible with an LLC. In fact, your last comment is opposite of the truth. LLC's require far less paperwork and formality that does a corp or s-corp.

 

Like I said, that is why he recommended S-Corp based off my situation. I didn't state that they where not possible under an LLC.

 

actually if you go to your state website you should find the correct information i live in florida and i went to myflorida to complete everything just a small fee to be a registered company and be able to pay taxes!!!! its exciting haha

 

Thanks for the responses! Do you guys have any suggestions for resources for more information on the subject?

 

Where do you live, what state?

 

california

 

keep in mind

in california, both LLC and S corp must pay $800/yr

S corps i believe can waive $800 fee their first year if they operate at a loss?

 

LLC are better than S Corps.

Though, fees is the issue which varies from State to State and Country to Country.

 

how does the tax structure work? what kind of savings are you guys getting on taxes?

 

I would start reading this page.

http://www.ss.ca.gov/business/resources.htm

If you don't know if a reason you need a corporation, you should do an LLC. They are far easier to maintain. You do not need to worry about corporate minutes and all that. The application form is a simple 1 page form. After that you need to put an "Operating Agreement" together and sign it. That is all. Some banks just want a copy of the filed "Articles of Organization" some also ask for a copt of the operating agreement.

I think the total application fee is $70 (I think you can mail the form in, but it takes weeks to get back)
http://www.ss.ca.gov/business/llc/forms/llc-1.pdf

There is no cost to get a tax id number, again a 1 page form.

That is all the fees associated with getting an LLC. Unless you pay a service to fill out the 1 page for or file it for you.

 

The tax structure depends on what entity you choose. If liability isn't a concern, and you don't have significant income, you'll probably wind up spending more with an LLC or corporation. You have start up cost, tax preparation will likely be more, you'll pay a minimum of $800 to CA just for operating in the State, and you must also pay yourself a market rate salary (just not pay out profit as a dividend) with a corporation.

 

But if you pay yourself market rate salary, doesn't that get taxes at the normal rate?

 

Yes, if you pay a salary to yourself, it's just ordinary income, just as if you earned the income at a job for an S Corp. that someone else owned.

I wrote a book on this very topic...which entity to choose...it's called Ultimate Book of Forming Corps, LLCs, Partnerships & Sole Proprietorships (Paperback) . You can get it on amazon for like 15 bucks. After reading it through, you'll know more than most lawyers.

 

Mr. Spadaccini you have a nice set of books published under your name.

 

but i thought one of the main purposes of forming an LLC or S corp (besides the liability issue) was for tax benefits? isn't there some way you can pay yourself besides a "salary"?

 

If you want to save tax, my opinion is go with none, neother LLC nor S Corp