business process: LLC? S-corp?

[coldfront]

thinking about stuff like this...anyone out there who can/could walk me through the high points in the decision process?  Pros/cons...  stuff like that?

[Creel Limit Zero]

Well, it all depends on what you are trying to do.  If it is just a small business you are running yourself, or maybe with just a few other guys, and don't have the money to handle all the Legal advice for an S-Corp required, then LLC is what I would go with.  Why do you say, well for one, Preparation.  With an S-Corp - you can only divide up the profits of the Company by the Shares of Stock that have been Issued.  You will need "Legal/Tax" assistance in creating the Company, with Legal documents showing the amount of stock, and the shares in each person's name.  If 2 years down the road, one person decides to get out of the Company, you need to Hire more Legal/Tax advice to sell those shares of stock to get him out of the Company.  Otherwise, Legally, that person still is allowed that same % of Income from the Company.  It's a lot more work.  You also are required to have a Board of Directors with an S-Corp, have meetings, keep minutes of those meetings, and be able to produce this information readily upon any Tax Audit. 

With an LLC, startup is very easy, can be done on your own.  And you can divvy up profits to the Owners as you see fit.  70/30 one year, then you decide you want to make if 60/40 the next, giving your partner a bigger share, takes little to no work.  To make that change with an S-Corp, you would have to hire an Accountant or Lawyer to draft up the Paperwork. 

Now on the other hand, an S-Corp, the benefits are employment tax.  Only the Owner has to pay Employment tax, while the rest of the Members only pay employment tax on a "reasonable" salary, and no employment tax on the Profit Sharing.  So this is the benefit if you have multiple members of this corporation.  If this is just for you, LLC certainly is much easier.  So one big way folks use an S-Corp to get out of paying Employment tax, is they give 50% of the Company to their Wife, and if she works she is already paying Employment tax.  They give their spouse a "reasonable" salary, and then 50% of their profits (after salary paid) will not be subject to the 15.3% employment tax.  Really, this is the only benefit in my mind in doing an S-Corp.  If you are not going to take advantage of it, I would do an LLC...

[coldfront]

wondering what best approach is for a sole proprietorship business.  s 'an army of one'...one owner, cook, bottle-washer...and employee.

just wanting some kind of legal buffer between my personal finances and the 'start up' finances..

and needing to understand all the 'fun/games' as they relate to legal tax bennies/breaks...

[Creel Limit Zero]

Well, both options S-Corp or LLC will offer about the same protection of your personal finances and the Company's, much more protection over a sole proprietership.  But that protection of debt only holds true if you do not sign any Personal Guarantee's when you are getting credit from your vendors.  It also won't give you much more protection over getting sued by negligence, so you will still need some Liability Insurance or they could come after you if anything ever happens...

The real difference that I know about between the two is employment tax.  If you are not sharing in the profit of the company with anyone else, then you are not going to tax benefit from being an S-Corp.  You just are going to get headaches from all the extra paperwork required... 

[iClass]

I own my own consulting firm.  GM Consulting LLC.  I am also an 'S' Corp.  I am the one and only owner/employee of my firm.  I am not publicly traded.  There are many benefits - Tax wise - Depending on amount of expected earnings - Gross/Net and of course what you wish to claim as a salary.  The best advice I can offer is to discuss all of this with your CPA.  He/She can also help with the paperwork.  Not difficult, I incorporated myself - CPA filed papers for the S corp.  Cost about $150 by the time it was said and done with.

[Hydrilla Gorilla]

Hopefully I'll have my CPA next fall and I can help you guys out

[coldfront]

I own my own consulting firm.  GM Consulting LLC.  I am also an 'S' Corp.  I am the one and only owner/employee of my firm.  I am not publicly traded.  There are many benefits - Tax wise - Depending on amount of expected earnings - Gross/Net and of course what you wish to claim as a salary.  The best advice I can offer is to discuss all of this with your CPA.  He/She can also help with the paperwork.  Not difficult, I incorporated myself - CPA filed papers for the S corp.  Cost about $150 by the time it was said and done with.

iClass:  any CPA?  or are there some keys to asking them questions to find one best suited to help?
(thanks a LOT for the answer)

have always done my own taxes...but if things go reasonably well, I'm going to have to move from the 'Bank of HushPuppy' (shoebox) to more traditional...er, trace-able approaches...