Home: Message List - Right form of entity - S-Corp. vs. LLC

Re: Right form of entity - S-Corp. vs. LLC

viahraj — Thu, 17 Jul 2008 17:39:26 GMT

Hi Everyone,

I had a doubt. Company was started in 2007 as S corp with only one owner. The owner has green card. And I am working in a company as fulltime employee right now on H1B visa and residing in california since 4 years. I would like to be 50% shareholder of the company. Is it ok for me to enter as 50% shareholder into the company as i am fulltime employee of another company? is there any legal issue?

Thanks...Raj

Re: Right form of entity - S-Corp. vs. LLC

Manoj Gupta — Sun, 02 Mar 2008 01:16:04 GMT

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Re: Right form of entity - S-Corp. vs. LLC

dublincpa — Sat, 01 Mar 2008 23:25:35 GMT

The answer depends entirely on how much is available for owner compensation and benefits and what proportion of it you want to use for tax deferred retirement and owner health benefits. Other employees always have to be included, but there are permitted disparities.

Assuming the profitability and employee profiles of the businesses are different, you would make sure that one was spouse works for, owns and manages each entity. This includes being a director or officer.

You would then set up the better benefits on the company that has the most favorable profile. It gets more detailed and more complicated from here, but your accountant can probably help you. Let me know if you or your accountant need more detailed directions on where to take this.

Re: Right form of entity - S-Corp. vs. LLC

rhildreth — Fri, 29 Feb 2008 22:56:08 GMT

What i was trying to say, is I cant find your excel file to download. Any help is appreciated. thanks

Re: Right form of entity - S-Corp. vs. LLC

rhildreth — Fri, 29 Feb 2008 22:48:07 GMT

Hey read your to your web site but I was not able to find/download the excel file. Any suggestion?

Thanks

Re: Right form of entity - S-Corp. vs. LLC

RBEnterprise — Fri, 29 Feb 2008 22:08:33 GMT

How profitable for tax and/or accounting purposes is each entity expected to be? What about positive cash flow? If there is a spouse in the picture and the businesses are independent enough, you could structure the ownership to maxime tax and employment benefits to the owner(s).

How could i structur the ownership to maximize the tax and employment benefits to the owners. The is going to be rental units and flipping going on, and the clothing company has a positive cash flow already because ive been doing that business for 2 years now. And yes there will be a spouse in the picture.

Re: Right form of entity - S-Corp. vs. LLC

dublincpa — Fri, 29 Feb 2008 22:01:39 GMT

If the real estate is rental real estate, you all but definitely don't want that to flow to any kind of corp, not even an S Corp. If it is a development or flipping business, that would be ok to flow to a corp or LLC.

How profitable for tax and/or accounting purposes is each entity expected to be? What about positive cash flow? If there is a spouse in the picture and the businesses are independent enough, you could structure the ownership to maxime tax and employment benefits to the owner(s).

Re: Right form of entity - S-Corp. vs. LLC

RBEnterprise — Fri, 29 Feb 2008 22:00:47 GMT

We will need a little more info than that. Where? What will the enitities be doing? How many owners? Will they all be profitable immediately or do you anticipate significant startup losses?

Im in iowa. One division will be a clothing company. The other will be a real estate company. The other will be a entertainment company. The parent company i am the only owner. The real estate company there will be 2 owners. The clothing will have 5 owners. The entertainment company will have 2 owners. I expect only the entertainment company to take a loss the first 2 years. And the rest will be profitable immediately

Re: Right form of entity - S-Corp. vs. LLC

RBEnterprise — Fri, 29 Feb 2008 21:47:26 GMT

Well im going to be doing retail/entertainment/real estate. My enterprise is just the parent company of the other three that will be like divisions doing all of the work. I want the other 3 companies to take loans from the parent company so the parent company will holding all assets and the other 3 holds the debt. Im in iowa and i also plan on starting a non profit corp. I want to bring entertainment to iowa.(This is a thought i have not formed the LLC's yet but plan on doing so within the next week.)

Re: Right form of entity - S-Corp. vs. LLC

dublincpa — Fri, 29 Feb 2008 21:21:33 GMT

We will need a little more info than that. Where? What will the enitities be doing? How many owners? Will they all be profitable immediately or do you anticipate significant startup losses?

Some states also have Series LLCs that kind of work like corporate subsidiaries with some differences. If you will do business in multiple states, this may not be worth it. Most states do not recognize them except as a single LLC.