LLC, S-Corp, C-Corp Owners

[Videographer]

On the "old site" we had a discussion concerning LLC's, S-Corps, and C-Corps. I remember this discussion entertained various opinions on information, lessons learned, and etc....relating to tax issues, liability, and other issues.

For those of you that have walked down this road before (setting up these types of businesses) what were some of the "do's and don'ts" that you came across, or some lessons learned that you would like to share?

Looking back what would you change?

[Videographer]

Anyone started up any one of these types of business?

[Stupid]

I have started several. The first and foremost question is to ask yourself, what is your "five year goal?" Is it better to start a DBA if u only want to seek this as a part-time venture? It all depends on what you want to accomplish. LLC provides you with the least liability from Corporate debts, however, you will have to sign a personal quarantee on almost every credit app. S-corps are ok, but take a closer look at the double tax. Do your research and determine which corp fits your "business plan" the best. It might be as simple as filing a DBA for what you want to accomplish.


Anywho, thats my 2 cents worth,

Jeff

[Longhorn]

I'm looking to set up one of these for myself in the future. I'm sorry for being stupid, but what is a DBA??

[Marion]

DBA= Doing Business As

I have a company set up this way. I mostly sell my labor and only occasionally buy parts and equipment for a job so it works out well for me.

[Dusty]

I have an s-corp. as long as you stay below the franchise tax level (I think it is 250K gross income) you don't have to pay any state taxes. Remember that if you have shareholder distributions you have to pay yourself a salary. I typically pay myself a salary and then distribute any extra funds. I pay full tax (both halves of SS and Medicare) on what is salary but only income tax on the remainder of the income the corp earns. You can't avoid paying income tax but you can avoid the 15.6% that you would have to pay if I was a DBA. I am aware that the IRS is trying to get changes made that would reqiure the 15.6% on the total income but it has not happened yet. This is the way John Kerry and his wife have their income come to them, I'm doing the same thing only on a much smaller scale. I have just planted a vineyard and I am considering another one for it too. My wife is a cpa so that makes tax season cheaper for me but even without that mine is small so it would not be an expensive proposition at any rate. I would suggest that you talk to a cpa about what you are trying to accomplish with your business since your goals could greatly influence which is the best for you.
I also have had a LLC in the past and personally I like the s-corp best but every business is different.

[Muygrande]

If you are going to be investing a lot of time and/or money in a new venture you really need to talk with an experienced Business Attorney or competent CPA. Taxes, liability, protection of your personal assets, ability to grow the business, are all at play depending on the type of entity that you choose. Unfortunately, most people never know that there is a problem with how they organized their business until something goes wrong. A few hundred bucks spent now can save you a whole lot of money and sleepless nights down the road.

[dennisomfs]

depends on need...from liability, an LLC set up thru Delaware is cheap ($about $200/year)....I use these...everything I own is through a revocable living trust so I actually own nothing !

[RAZORBACK]

Actually LLC is the best way to go due to advantages relating to structure and types of shareholders. An LLC and S-Corp are taxed exactly the same - they are both pass thru entities as the income/loss is passed thru to your personal returns thru a K-1. An LLC offers you the abiltiy to take on preferred shareholders to raise money where an S-Corp will not. They both offer asset or creditor protection. Always seek the advice of an attorney and a CPA before you make this decision, but I'd be suprised if an LLC won't give you all you need. That's all we use.

Good luck -

[Videographer]

Thanks everyone, just the type of information I was wanting to gather.

[CaptainDave]

I agree with Razorback, the LLC is probably the best. I am an accountant and would say most of my small clients are either LLC's or S-Corps.

DBA's and general partnerships are cheap and easy to set up. Often times, it is as simple as filing a few documents with the county of your business and paying a small fee. The only problem with both of those is the fact that you are FULLY liable, not just to the extent that you are vested in your business, but everything that you own. With the general partnership, all partners are liable regardless of who mucks up.

Besides decent tax status, that's the good thing about LLC's and S-corps. You have limited liability, generally at the most up to your stake in the company.

Taxes and cost are things to look at, but you also have to think about your liability involved.

Quite frankly, do some research on the topic. There are many options open to you. It often depends on what the business is, and your potential monetary investment. Another thing to think about, is that it is not unusual to start as one type of company and switch to another later on. Good luck to you, since how roughly 60 percent of all new businesses fail within 2 years.