If you ask entrepreneurs what are their major challenges in getting a new business off the ground, the three most common responses are money, money, money. There are indeed other major challenges but the primary concern of most new businesses is how to attract startup funding. Whether the entrepreneur is opening a small service business or introducing a new product onto the market, the challenge of funding looms large. When these small business owners face a major hurdle in attracting funding to support their new businesses, either as they are starting out or as they try to grow the business, they have at least three options: funding their business with their personal reserves; taking out a loan; attracting investors. This Rosten Law blog briefly discusses each of these options.
Careful when electing LLC taxed as S Corp. Your startup business is organized as a LLC and you have consulted with your small business lawyer and tax adviser about whether you should elect to be taxed as a S corporation. Your startup lawyer has filed the papers to organize your LLC in Washington DC or elsewhere. You decided to make the S corp election to save self-employment taxes—a good reason for many small business owners. All is good and well, except that there are looming traps for the unwary. When you talk with your tax adviser or your startup attorney, you want to come prepared and understand that the S corp election may pose some financial risks for you. This article describes some of the looming risks for those business owners who have elected for their LLC to be taxed as a S corp. This article is not meant to provide tax or legal advice, rather to highlight some of the issues that you as the small business owner may face and will want to make an informed decision with you small business attorney or tax adviser. This article was not intended to provide an exhaustive list of differences between taxation of a partnership and taxation of a S corporation. Rather, this article was intended to highlight some of the differences. You may have a good idea of your exit strategy for your new business. If you think that you will be able to take it public in a few years, or that you will stand to benefit for minimizing self-employment taxes, then there may be good reason to make the election to be taxed as a corporation. This article intended to point out some of the countervailing considerations and you should discuss your particular needs with your small business attorney and tax adviser.