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    1 Reply Latest reply on Feb 3, 2010 2:26 PM by anicefob

    New business: confused by type & structure...

    Bianca007 Newbie
      Hello,
      I am in the process of setting up a new company and am a little lost about which direction to take. I was wondering if anyone could perhaps point me in the right direction.

      I am in the process of opening an online retail store. Business will be conducted solely online. For now there will only be one online store, however, providing this does well, we will be opening a second site/store that targets a different market. My question is in regards to which type of company I should be setting up: A corporation or an LLC? Or does it not really matter?

      My other question is in regards to structure: does each of the stores have to be registered as a seperate entity or can I run those two stores under a main company? For example, I know that if I have a company called ABC Inc. I could open my two online sites as a DBA under my main corporation with names like "ABC Cosmetics" and "ABC Apparel". BUT, is it the same if my company is ABC Inc. and I have two sites that operate as "DEF Cosmetics" and "GHI Apparel"? (two sub-companies don't use the ABC part)?

      The two companies will be seperate sites, but I will be running both of them. How can I go about setting up this company in the easiest way? Should I register both sites seperately? And if so, should I register a third company to operate these two sites or is that not needed?

      Any help would be greatly appreciate as I am completely lost here :(
        • Re: New business: confused by type & structure...
          anicefob Newbie

          Both corporations and LLCs limit the liability of the owners/shareholders from the debts of the business and against lawsuits against the business. Corporations and LLCs are different in how they are taxed. Because corporations are separate entities, they are taxed at the corporate rate, while LLCs are taxed based on Adjusted Gross Income of the owners.

           


          An LLC is formed by one or more business people, as owners. The owners, called "Members," file Articles of Organization and set out an Operating Agreement. An LLC is a pass-through type of business, because the profits and losses are passed on to the Members depending on their share of membership. A Corporation is a separate legal entity. It is formed by filing corporate organization forms in the state where the corporation is located, and by designating shareholders, each with a specific number of shares (% ownership). The corporation also creates a Board of Directors to oversee the corporate business. A corporation is a bit harder to form than an LLC. A corporation can be a c-corporation or s-corporation. C-corporations are the large ones you generally see (Microsoft, GE etc etc). An S-Coporation is very similar to an LLC with a few differences.

           


          In an S corporation, only the salary paid to the employee-owner is subject to employment tax. The remaining income that is paid as a distribution is not subject to employment tax under IRS rules. In an S-corporation, there is no special allocation of profit and losses for shareholders. Corporate profits and losses must be split up proportionately to the percentage of shares owned by each shareholder. LLC's on the otherhand allow for flexibility as to how they split their profits and losses. So if you worked more than your partner, you can split up profits unevenly - unlike in a corporation wherein you have to split according to % ownership.

           


          Regarding your DBA question...I don't think the child entity has to have a similar name as the parent entity.

           


          Hope this helps.