LLC vs. corporation
Traps for the Unwary: LLC Taxed as S Corp
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…
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Forming a New Business: Corporations vs LLCs
Your startup attorney may suggest that you look at the S corporation and LLC as the two most attractive options for forming your new business. There are a number of considerations for you to keep in mind for your startup business and for you to decided on a LLC or S corporation. They generally fall into four major categories: Protecting personal assets: the business owner wants to assure that the new business’ creditors can only get at the assets of the business, not those of the individual owners; Transferring interests in the business: whatever form you have, you want to be able to transfer stock, or ownership interests in your business; Admitting new investors: you want to make sure that you have a mechanism to admit or restrict new investors in the business; Taxes: which corporate form allows you to pay the…
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