Are you thinking about starting a business? Do you need to set
up a 'limited liability' entity but aren't sure what kind is right for
you? Maybe you have an established business but need help taking it to
the next level?
Well, you've come to the right place. We can help you with all aspects of your business, including:
- LLC or Corporation? S-Corp? Not Sure? Let us help you get on the right path.
- Operating Agreement/Partnership Agreement
- Corporate Binder/Documents
- Buy-Sell Agreements
- Asset Purchase Agreements
- Mergers and Acquisitions
- Asset Protection
- Tax Planning
- Commercial Leases
- Contract Drafting and Review
LLC vs S-Corp - What should I form?
There are a lot of factors to consider when deciding on what type of entity to form for your new (or existing) business. The important thing is that you do form a 'limited liability' entity.
It is very easy to do and can protect you from personal liability. In other words, a limited liability entity, if properly formed and maintained, will limit your loses to the money and/or assets that you have put into the business venture, as opposed to ALL the money and assets that you own personally (ie: the home you live in).
Corporations (including S-Corp.s) and LLC's offer this limited liability, assuming you follow the rules, also known as 'observing the formalities'. If you fail to observe these formalities, you run the risk of losing your protection. Corporations have quite a few more formalities to observe than do LLC's, which is why lawyers tend prefer LLC's. However, Corporations, especially S-Corporations, tend to offer more tax benefits, which is why CPA's tend to push S-Corp.'s.
However, one great thing about the IRS (not a phrase you hear very often, is it?) is that they allow you to choose how you want to be taxed. When you form your entity you can simply elect to be taxed as a partnership, an S-Corp. even if you are an LLC!
When you elect to be taxed as an S-Corporation you get the luxury of paying yourself twice - part of the money you earn can be paid to you as an employee in the form of a 'reasonable salary'. The rest can be taken on a 'dividend'. This is a nice alternative to paying the 15.3% Self Employment Tax on every dollar you make.
For example:
If you earned $60,000 in 2007 and are taxed as a LLC/partnership, you will pay Self Employment Taxes on the entire amount, which amounts to $9180. However, if you were taxed as an S-Corp., you could pay yourself a conservative 'reasonable salary' of, say, $30,000 and take the remaining $30,000 as a dividend (unearned income), saving yourself $4590 in SET.
