LLC or S-Corp – Which one is right for your Business?
First question clients ask is do I form an LLC or S-Corp? Most of the time clients will say S-Corp, but let’s get something straightened out before we even go any further. S-Corp is not a legal business entity, it is a tax designation that you elect when filing taxes. You have to set up your corporation in a manner that allows you to elect that tax designation, but for purposes of legal liability, you are a corporation, for tax purposes, you are electing to be taxed as an S-Corp. Now that we cleared that up, An LLC stands for Limited Liability Company.
Deciding whether to form an LLC or a Corporation that qualifies for S-Corp tax designation can be very confusing but hiring a business law attorney can make it manageable for you. I do not recommend that you do this on your own. Every business is different and every business owner manages their business affairs differently. Both are factors to consider when choosing the right entity.
Business Incorporation – Important factors to consider
Some other important factors include the tax liability and how that impacts your bottom line, the flexibility of the corporate formalities, filing fees and annual renewal fees. The decision is not as simple as some people may assume. Registering with the secretary of state of the state you intend to operate is just a start. Most states require governing documents for them to recognize your corporate entity status. You will also need to know how you will maintain your personal liability shield, which is the whole point of creating a separate entity. Moral of the story is that there is no straightforward answer because there is no one size fit all.
You do not have to hire our firm, but you should call your lawyer to discuss your options. A good lawyer will have a rapport with a CPA that they will also refer you to because choosing between an LLC and a corporation requires weighing the legal and tax implications of the entity you choose. Call or contact our office today and we will hold your hand through the whole process and guide you properly.