Should I form an LLC or a Corporation

[kryptonianson]

I am still in startup mode and was wondering if anyone had any suggestions. I may choose to have a couple of partners. Other than that I have no idea what I should do. What would you guys suggest, or what have you done and why?

[RyanMeray]

I went with an S-corporation, but I'm not sure that those play nice if you have partners. The best person to ask about this would be your accountant, who should have a bearing on what kind of tax needs and liability needs you'll have with your specific operation. If your accountant doesn't seem to have a clue, find a new one.

[schwags]

I went with an LLC because it offers the protection of a corporation and you only get taxed once. I believe with a normal corporation, the corporation gets taxed as an entity and the individual salary gets taxed as it normally would if you worked for someone else. With an LLC the income gets taxed just once, as personal income. But, I still retain the limited liability that is so beneficial to a corporation.
Now, that being said, I know this much about my LLC, but I don't know the exact differences with c-corps and s-corps. I would agree with RyanMeray that you need to contact an accountant. I know they cost a little bit, but mine has more than paid for himself.

[RyanMeray]

Originally Posted by schwags

I went with an LLC because it offers the protection of a corporation and you only get taxed once. I believe with a normal corporation, the corporation gets taxed as an entity and the individual salary gets taxed as it normally would if you worked for someone else. With an LLC the income gets taxed just once, as personal income. But, I still retain the limited liability that is so beneficial to a corporation.
Now, that being said, I know this much about my LLC, but I don't know the exact differences with c-corps and s-corps. I would agree with RyanMeray that you need to contact an accountant. I know they cost a little bit, but mine has more than paid for himself.

Yeah, an S-corp avoids the double-taxation by allowing you to pass through all profits to the individual so you only pay taxes once, but I don't know if that gets complicated when you have more than one owner/partner. That's where having an accountant comes in.

[thor999]

I'm actually going to interview a CPA next week, do you guys have any questions you'd like answered while I'm there? Again, prob best you consulted with one yourself.

[darthpickle]

Just met my new accountant last Monday. Really informative session, and she gave me 30 minutes free ($75/hr normal rate) I talked really fast, and got all my questions answered in the 30 mins. LOL

I decided to have her prepare my taxes quarterly instead of annually, especially for the first year of business, since I have no idea what type of tax liability to expect.

She told me to be prepared to have net profits taxed at a combined 46.05% (Federal, Self employment, Social Sec, State, and applicable city taxes)

Jeesh. This was depressing news.

[supertech365]

Originally Posted by darthpickle

She told me to be prepared to have net profits taxed at a combined 46.05% (Federal, Self employment, Social Sec, State, and applicable city taxes)

WTF! I hope that is a misprint. I figured maybe 36%. This will be my first year filing tax as an LLC, as i have been registered since March 08. Also, one of the main benefits to forming an LLC is that if you are sued for assets by the government or whoever, only your business assets can be taken. But your personal assets can be touched. Even the personal assets you buy from the profits of your business can be touched, only true business assets. But if you will have investors, most times its best to go with corporation. But as always, check with an accountant. www.nolo.com is a good site to reference.

[Skyhooker]

Originally Posted by darthpickle

She told me to be prepared to have net profits taxed at a combined 46.05% (Federal, Self employment, Social Sec, State, and applicable city taxes)

Jeesh. This was depressing news.

When you first make the switch from being employed to being self-employed, you begin to realize just how much is stolen from you day upon day by layer upon layer of government. First, because no one is deducting from your paycheck and you see every dime pass through your hands; second, because an additional 7.65% "self-employment tax" which was being submitted by your employer (though paid by you, in reality, in the form of reduced wages) also goes bye-bye. From there your eyes may be opened and you see taxes everywhere (and wish for your cozy bed back in The Matrix).

Ain't Freedom grand?