Post a new topic
    6 Replies Latest reply on May 5, 2009 8:51 AM by diversetax

    llc or s-corp?

    sabrina Newbie

      I and a partner want to start a cleaning service in virginia. what we can't decide (don't have a clear understanding) on is whether to start an LLC or an S-corp. We know both has its advantages and disadvantages, but which is best? We would be a small company, with just the two of us now and looking to hire about 3 or 4 employees in the near future, as business progresses. Please help us by giving opinion on which business structure to go with.
        • Re: llc or s-corp?
          Bridge Navigator
          Earnings from an LLC can be disbursed to partners on whatever basis the Operating Agreement dictates. Money from an "S" corp is disbursed in proportion to each owners contributions (ownership).

          That being said, you can always pay different salaries.

          If you do elect to be an LLC, be aware that is a corporate structure not technically recognized by the IRS and they will automatically classify you as another type on entity for taxing purposes (I Believe a partnership in this case). If you choose an LLC structure, be sure to file the necessary forms with the IRS to be taxed as an "S" corp:

          Form 8832 Entity classification (to be classified as a corporation)
          Form 2553 Election by a Small Business Corporation (To be taxed as an S corp)

          This will allow for pass through income.

          Choosing an LLC has some small tax advantages regarding distributions and payroll taxes but there is a little extra paperwork involved up front.

          You should talk to some local accountants and ask for their opinion based on your specific situation. Additionally, with a partner, you'll want an attorney to draw up your corporate documents (Operating Agreement or Shareholder Agreement) depending on the structure you decide on.

          Remember, with a partner you are entering a "marriage" and everything looks good now but you need your "prenup" in place in case you need to dissolve the arrangement down the road.

           

          Good Luck!
          1 of 1 people found this helpful
          • Re: llc or s-corp?
            sabrina Newbie
            Thanks so much Bridge for your reply and info on LLC and s corp. it was very helpful.

            Sabrina
              • Re: llc or s-corp?
                Bridge Navigator
                If the answer was helpful, please mark it either an "answerd/corret" or "helpful"

                Glad to be of assistance.

                Thanks,
                Greg
                  • Re: llc or s-corp?
                    LCM420 Newbie
                    Bridge,

                    Try this scenario on, any feedback would be greatly appreciated.

                    We are looking to start a new record label with 4 partners/owners one partner is the main artist. We've been advised to take the LLC route to lessen the liability the owners will face in the event of silly "rock star" mistakes, damages, and so on.

                    In reading some similar posts and replies on this board I've become really concerned about the tax liabilities as well. I honestly don't think we'll make much money or any at all starting so I maybe putting too much worry in the place but I'm secretly optimistic about it all since we have outstanding talent to work with. But I'm learning that in the music biz things can move extremely fast and if things do take off I don't want Uncle Sam running off all of our profits.

                    As mentioned before any advice on LLC, LLP, and so forth would be fantastic!
                • Re: llc or s-corp?
                  diversetax Wayfarer
                  Bridge gave great response and his advise is wonderful. If you need more information on obtaining an attorney for as little as possible, please visit my website and view the video. I am an associate and member. This company also prepares legal documents for your company, reviews them for you and much more. Go to: www.prepaidlegal.com/hub/smross My site will show information on the family (individual plan) and we also have a plan for your business.

                   

                  God Bless