1. Should I Use a Corporation or LLC for My Business?
The short answer is that both are good entities but each has its advantages and disadvantages. For most businesses which provide a service or sell a product, Iprefer an S corporation. For businesses involved in the transfer of real estate or holding assets, an LLC may be the better choice.
Without question , incorporating your business or forming an LLC may be one of your most important business decisions yet. Operating your business as a separate legal entity will protect your personal assets from the threat of lawsuits and can, with the proper planning, save you some serious tax money.
The differences between a corporation and LLC concerning liability . Both C corporations and S corporation receive similar liability protection. Both are governed by the corporate law statutes and the court opinions in the state where incorporated. LLC’s receive similar liability protection as do corporations. The main difference is that corporations have a longer history or tradition in our law than do LLC’s and therefore have more legal case precedent or case history than do LLC’s. This means that it may be easier to predict the outcome of a legal dispute involving a corporation because there are more prior cases to compare with. However, the liability protection between the corporation and LLC should be similar. Based on this, you can feel comfortable using either entity if your main concern is liability protection and you properly organize and operate the entity .
What are the tax differences? A regular of C corporation is considered a separate taxable entity. So if the C corporation earns a net profit during the year, the corporation itself must pay corporate income tax on the net profit. Then if the corporation pays a dividend to shareholders, the shareholders are taxed again individually. This results in a double tax. In smaller companies, the double tax can be reduced in most cases by having the corporation pay sufficient salaries and benefits to the shareholders who also work in the business, so that there is little net income remaining. This works up to a certain level but care must be taken not to carry this too far. The other way to avoid the double tax is to form an LLC or an S corporation, since these entities do not pay income tax on net income.
S corporations and LLC's receive similar tax treatment, that is the shareholders of an S corporation or the members of an LLC are usually taxed similar to a partnership where the income and/or losses are reported by the individuals on their own tax returns. S corporations may help to reduce FICA taxes while this benefit is still uncertain with LLC's. Because LLC's are relatively new, some accountants are concerned that certain tax issues are still not decided by the IRS.
2. How much will it cost to get it done right?
Most incorporation services offer a confusing choice of services and costs. If you start with the economy service, which is usually just part of what is needed, and then add a few additional services, the costs are often substantial. On the other hand, you can pay a lawyer who doesn’t do many incorporations anywhere from $600 to $2000 plus the state filing fees. The good news is that you really don’t need to pay that much for good efficient service.
We have one fee - for a complete & total incorporation service or LLC formation .
The cost is just $387 plus the state filing fee. For a list of state filing fees, click here.
You can pay in whichever way is most convenient for you; by credit card, by check or by money order. We are flexible.
3. What is the process of incorporation and how fast can it be done?
The incorporation process (or LLC formation) involves several steps. The first step is to file the initial documents, either articles of incorporation or articles of organization for an LLC, with the secretary of state’s office and pay the required filing fee. Next, to be fully organized a corporation needs to adopt bylaws, prepare minutes of an organizational meeting, issue stock certificates and obtain a new Federal Employer Identification Number (EIN). The process is similar for an LLC but the documents have different names. Instead of bylaws, the LLC members usually prepare and execute an Operating Agreement which governs the relationship between the members of the LLC. In addition, although not required, minutes of an organizational meeting are helpful and certificates of membership can be issued.
We can usually get the initial paperwork filed with the state within a day’s time of receiving information from the people wanting to form the new entity. The official start date of a new entity is when the paperwork is filed with the state. Within a few days after filing with the state, we then prepare and send by Priority Mail the other documents needed to be fully organized. The entire process can be completed within a weeks time. We can expedite or rush the process if needed.
Please feel free to contact us at 1-888-527-6207 with any questions you may have.
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