Are You Set Up As A Sole Proprietorship, LLC, Or S-Corp?

What Type Of Entity Are You Set Up As?

  • Sole proprietorship

    Votes: 95 23.4%

  • LLC

    Votes: 184 45.3%

  • S-Corp

    Votes: 98 24.1%

  • Other

    Votes: 29 7.1%
  • Total voters
    406
In terms of legal protection an LLC & S-Corp will both cover you. And with the uncertainty in the industry, the Oprah's of the world sueing because the landingpage featured her in their landing pages, its almost a necessity.

The only difference is going to be the tax you will pay as well as what your required to file annually. An S-Corp is going to require more paperwork than an LLC...
 


You might want to check out your local small business development center (sbdc).

They are paid by the state (if you are in the US) to help incorporate businesses to increase tax revenue.

They explain all the ins and outs of each type of business and can help you select which type of entity makes the most sense for you.

They don't charge you any kind of filing fee like an accountant or lawyer, just the actual cost you would incur if you did everything yourself.
 
If you aren't sure what to do today, make an LLC. You have until next tax season (March 15th for LLCs) to decide how it will be taxed. Depending on how much money you rake in, and what you want to do with that money, your LLC can be taxed as an S-corp, partnership, or C-corp.

If you want to attract venture capital at some point, it will be easier with a C-corp which can offer better defined protections to shareholders.

Personally, I have 1 LLC taxed as an S-corp and just established another LLC with an open tax status. I like Wyoming LLCs and chose them for both of mine. If you're in a state with affiliate tax bills threatening to screw up the works for you, an out of state entity might be wise.
 
Anyone know roughly how much it costs in total to set up a LLC? I know it will vary by state, but an estimate? I'm looking at my state's .gov page and it lists about 15 forms that cost about 100 a piece... newbie question, but what's my first step in doing this?
 
@dubbyah You probably only need one of those forms for the LLC and a second form to get an EIN (employer identification number) which is just like a social security number. The EIN form should be cheaper.... like $25-$50 I would expect.
 
Eagle, is some of those offshore? If not those proxy companies wont do you any real good if you get into any kind of real bind with the law/IRS.

I was in a similar situation in a prior business and found out the hard way.
 
Do S-corps/LLCs really provide you that much liability protection? Does anyone have examples of affiliates being sued and only their entity was effected or held liable in the suit?

While we may do our best to keep our "corp veil" intact it would seem most lawyers could find a way in, especially if we are just running a single member scorp/llc which most affiliates are prob using.

D. Dunlap & Associates, a Southern California firm specializing in estate planning, tax law, business law, and real estate has some interesting info on what we need to be doing to prevent a piercing. I find this part disturbing "...if you use your computers or electronics for business (though I recommend keeping separate business and personal assets), keep time logs breaking down the hours used on the computer for business and personal purposes."

No idea how technical lawyers get with this but based on the above it would seem they would try to make a case any personal emails/ims we got on a computer we have classified as an asset for our biz would show we are using company assets for personal use and thus break the veil. Also LOL at keeping time logs, thats impossible.

Mont7071 any insight into this?
 
DangerBrown said:
If you aren't sure what to do today, make an LLC. You have until next tax season (March 15th for LLCs) to decide how it will be taxed. Depending on how much money you rake in, and what you want to do with that money, your LLC can be taxed as an S-corp, partnership, or C-corp.

If you want to attract venture capital at some point, it will be easier with a C-corp which can offer better defined protections to shareholders.

Personally, I have 1 LLC taxed as an S-corp and just established another LLC with an open tax status. I like Wyoming LLCs and chose them for both of mine. If you're in a state with affiliate tax bills threatening to screw up the works for you, an out of state entity might be wise.
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How can an LLC be taxed as an S-Corp? What benefits do you draw by doing so?
 
PSU4Life said:
Do S-corps/LLCs really provide you that much liability protection? Does anyone have examples of affiliates being sued and only their entity was effected or held liable in the suit?

While we may do our best to keep our "corp veil" intact it would seem most lawyers could find a way in, especially if we are just running a single member scorp/llc which most affiliates are prob using.

D. Dunlap & Associates, a Southern California firm specializing in estate planning, tax law, business law, and real estate has some interesting info on what we need to be doing to prevent a piercing. I find this part disturbing "...if you use your computers or electronics for business (though I recommend keeping separate business and personal assets), keep time logs breaking down the hours used on the computer for business and personal purposes."

No idea how technical lawyers get with this but based on the above it would seem they would try to make a case any personal emails/ims we got on a computer we have classified as an asset for our biz would show we are using company assets for personal use and thus break the veil. Also LOL at keeping time logs, thats impossible.

Mont7071 any insight into this?
Click to expand...

My Opinion, keeping logs showing business vs. personal time on a computer is giving lawyers an opening to actually come after you, not providing more protection. It's usually better to say, "This is a work computer, 100%, just like my tax filings say it is" and put the onus on them to prove otherwise. If you say "well, I use it X% for work, and X% for personal stuff" you just gave a dedicated lawyer (such as myself) an opening to attack your "assignment" of each type of usage, and just put yourself on the defensive to counter their argument that you were intermixing business/personal assets.

In my experience, veil piercing usually requires a lot more of a transgression than just the fact that someone happened to ever look up something personal on a work computer. I don't know a single person who hasn't used their work computer to pay a bill or check movie times, and most courts probably see that pretty much the same way.

Being paranoid about this sort of thing is always a good course of action though, the more lax you are, the more cracks in the armor for an attorney to come after you. :)
 
mont7071 said:
My Opinion, keeping logs showing business vs. personal time on a computer is giving lawyers an opening to actually come after you, not providing more protection. It's usually better to say, "This is a work computer, 100%, just like my tax filings say it is" and put the onus on them to prove otherwise. If you say "well, I use it X% for work, and X% for personal stuff" you just gave a dedicated lawyer (such as myself) an opening to attack your "assignment" of each type of usage, and just put yourself on the defensive to counter their argument that you were intermixing business/personal assets.

In my experience, veil piercing usually requires a lot more of a transgression than just the fact that someone happened to ever look up something personal on a work computer. I don't know a single person who hasn't used their work computer to pay a bill or check movie times, and most courts probably see that pretty much the same way.

Being paranoid about this sort of thing is always a good course of action though, the more lax you are, the more cracks in the armor for an attorney to come after you. :)
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Thanks for providing insight into that.

I know it depends on which state the entity is formed in but in general would a multi member LLC/S-corp provide better protection than a single member?

Does working from home and having our LLC/S-corp mailed delivered to our personal address make us more prone to getting pierced?
 
From what I was told by my tax guy, last year my tax bill would have been cut in half if I had been an s-corp. Instead I was a sole proprietorship and really got hammer fucked on the self employment tax.
 
SmackDog said:
From what I was told by my tax guy, last year my tax bill would have been cut in half if I had been an s-corp. Instead I was a sole proprietorship and really got hammer fucked on the self employment tax.
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It is really that dramatic for you? I only saved around a few thousand with an s-corp.

The 12.4% social security portion of the self employment tax is only taxed on the first $110,000 or so you earn and the other 2.9% for medicare is unlimited.

So if you earn $500,000 and pay yourself a $100,000 salary while taking the rest as a dividend you just saving around $12,000 in taxes as compared to being a sole proprietor.
 
the only win I see on scorp for the way I would handle my money is the dividend rule where the dividends is taxed lower then your normal income. At some point you gonna take that money out of the company and then it gets taxed, just depends "how you take it out"
 
We have an S-corp and I'm thinking of getting another one. We've had it for years, and if you don't have an accountant, it's a huge pain in the ass to get started correctly. There are way more forms and hoops to jump through, but we've saved considerably on taxes.

Outside of paying state unemployment taxes should I ever fire myself from my own company, it's pretty reasonable to handle at this point. I did spend many a night pouring over legal books and guides to find all of the various details trying to be sure I didn't miss anything important, but it's definitely worth it.
 
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