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Tax and incorporation Issue: What Format Should I use?

by Brad Spencer
10 replies
Hey Warriors,

I was wondering how many people have LLCs or C or S Corps for their IM business.

Also, how do you account for earnings, profits, and tax issues?

Cheers,

Brad
#format #incorporation #issue #tax
  • Profile picture of the author Mike Long
    Oh man, I'd love to hear more about this.

    I've operated as a sole proprietor since 2003, and I can only imagine how many thousands of dollars I've overpaid on taxes.

    Subscribed, and hoping that people a lot smarter than me join in and bring some great info to the discussion!
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  • Profile picture of the author Tsnyder
    The best advice anyone could possibly give you is to seek
    advice from a qualified professional who can assess your situation
    and recommend the best course of action.

    What's best for my situation may not be best for you.

    Tsnyder
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    • Profile picture of the author Brad Spencer
      Originally Posted by Tsnyder View Post

      The best advice anyone could possibly give you is to seek
      advice from a qualified professional who can assess your situation
      and recommend the best course of action.

      What's best for my situation may not be best for you.

      Tsnyder
      I totally agree...and that's what I will do.

      I'm just curious what people actually do so I have some research done b4 I start paying someone by the hour...I do as much as I can before hand to save money and trouble.

      Thanks for your post though!

      Would you mind sharing what you do...with the disclosure that it's not to be taken as gospel?

      Cheers,

      Brad
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      • Profile picture of the author Scott Ames
        From personal experience I would not do a C Corp. I would do either an S Corp or LLC. I'm thinking of switching to an LLC.

        A C Corp is for those that do a lot of volume, have stockholders, and plan to go public someday. The C Corp is taxed, then any dividends passed on the the shareholders is taxed. If there is a loss, it is not deductable by the shareholders even if there is only one.

        An LLC and S Corp allow the revenue to be taxed once on the owners taxes. They are pass through enitities so that losses are passed on and can be deducted. Both offer protection against personal law suits to some degree. As long as you keep funds seperate and don't comingle things with your personal money mostly. Don't buy bread with the business cash and don't buy office supplies with your own cash. Keep seperate books and keep the minutes and corporate papers up to date. Nothing will protect you personally if you do something illegal or direct the business to do something illegal.


        I would go with an LLC personally.






        DISCLAIMER: This post does not and is not meant to give legal advice. I am not an attorney and we have no attorney client relationship. If you use any of the information imparted by this article, you do so at your own risk and I strongly urge you to consult your attorney. The information presented is my opinion only which may not be correct for your situation.
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      • Profile picture of the author DaniMc
        I'm not an accountant or anything...but I have formed many LLC's over the years so here is my input.

        1) It is so, so easy to do. Legalzoom charges like $400 for this and all you really get is a fancy notebook.

        Most states now have an online form you can fill out, pay a small fee ($25 - $50) and you are done. LLC formed. Just search a little and eventually you will find it when you get through all the services that want you to pay them.

        If you can't do it online...ALL states will have a form you can print out, complete and mail in and you are done.

        2) The next step is to get an EIN. Again....some services will charge you $100 or more to do this. No need!

        Go here: Employer ID Numbers (EINs)

        You can apply for the EIN online and have it done in minutes. Easy, easy, easy.

        3) Take the documents and get a business account set up.

        Seriously, this stuff is so, so easy. Don't ever work as a sole proprietor. You are causing yourself headaches trying to keep it all straight.

        As far as taxes go, a few more tips:

        Keep your accounts separate. Never mix your business and personal expenses. With your business account, never pay a personal expense.

        This is the quickest way for the IRS to say you and your LLC are the same entity and dissolve your company, charging all the income to you personally.

        So, make sure your business charges are business, no quick trips to the grocery store with company money.

        If you need the money for something, transfer it to your personal account first, then you will pay taxes on that money since it is income.

        Sure, get some advice, but it is so simple I don't bother anymore. I use an accountant for my annual taxes and that is it.

        I have even set up multiple LLC's for separate projects. There is no limit on how many you can have. For example, I may have a marketing project...let's call it Sweet Marketing Project.

        That project may have several components so I would form an LLC for each component: Sweet Marketing Project 1 LLC, Sweet Marketing Project 2 LLC, Sweet Marketing Project 3 LLC.....and so on.

        This keeps everything separate and protected in case you end up getting sued by a client or another business. Only one LLC gets burned. In which case you close it down and keep the rest going.

        Get it done!

        Daniel
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        • Profile picture of the author amylimcd
          I actually run an LLC formation services site and online/internet based businesses are our third largest type of customer (behind real estate businesses and consultants).

          The answer to your question really depends on your specific situation but 95% of small business owners (companies with between 1-3 owners) go with the LLC these days. It is just an easier legal entity to maintain.
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          • Profile picture of the author Travis72802
            Remember...Multiple LLC's means MULTIPLE tax returns. Just
            because it is easy to form a corp or llc doesn't mean it's prudent.

            A good accountant is worth his/her weight in gold.

            Sit down.

            Have a talk.

            Have him/her take care of your business formation and
            book keeping.

            Travis
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  • Profile picture of the author LB
    I would talk to a lawyer first. Each state has their own case law regarding corporate structures. In my state I was told by my attorneys that LLCs are not the way to go.

    Simple does not mean good.

    How would you like to find out that your state ranks first in the nation for piercing the corporate veil of LLCs...after you're litigated against?

    Talk to a lawyer is the only right answer.
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