• Welcome to OGBoards 10.0, keep in mind that we will be making LOTS of changes to smooth out the experience here and make it as close as possible functionally to the old software, but feel free to drop suggestions or requests in the Tech Support subforum!

Pit Bosses - S-Corp or LLC

Definitely don't put real estate into an s corp - 311 gain of you ever try to get it back out. For a consulting business, S corp is definitely better due to the SE tax issue. Note that the administration has made noise about changing this rule though.

Other things to check on: franchise taxes, legal protection (prob no different). If you ever want to bring in another owner you just new to plan carefully - you can do most anything you need through an s corp with disregarded entities.

One other thought: are you putting any property in? If so, make sure a) fair value exceeds basis or 362(e) can cause a write down of basis; and b) don't contribute any debt in excess of basis or you may trigger 357(c) gain.
 
Choice of entity has to be evaluated on a case by case basis. Anybody who says that one form of entity always has tax advantages over another form is wrong. That said, as a general rule, I tend to guide my sole-proprietor service business type of clients toward S corps primarily due to the SE tax benefit and Schedule K reporting, and because I feel that corporations are slightly more idiot-proof than LLCs due to the greater body of law out there governing their operations.

Real estate should almost always be held in an LLC taxed as a partnership or sole proprietorship because there are very significant tax benefits to be gained over any other form of entity; the primary exception is if the land is inventory (i.e. lots held for sale by a developer) in which case it may be OK to use an S corp. Some states have a franchise tax on LLCs (TX and CA, maybe others) in which case you use a limited partnership instead of an LLC for real estate. NC does not have a franchise tax on LLCs.
 
My wife and I want to start a LLC for the consulting side business we're already doing. I've contacted a lawyer who helped a friend start his business and I'm still waiting to hear back. From what I understand, I could also take care of it myself through Legal Zoom or something similar. Which is my best option?
 
I’d wait for legal help. You can get an LLC formed on legal zoom but it’s worth a few hundred dollars to know that it’s done right and does what you need.
 
I've never seen anything done through Legal Zoom that was actually done completely correctly for the intended purpose.
 
My wife and I want to start a LLC for the consulting side business we're already doing. I've contacted a lawyer who helped a friend start his business and I'm still waiting to hear back. From what I understand, I could also take care of it myself through Legal Zoom or something similar. Which is my best option?

*****THIS IS NOT LEGAL ADVICE*****

Go to sunbiz.org and you can file the forms with the State of Florida electronically.

You then need to go to the IRS and get an EIN number which can also be done electronically.
 
Eh, I think it depends on how comfortable you are digging into the minutiae, how much you intend to grow the business, and how risk-averse you are. I ran my own s-corp LLC for 5 years, went the Legal Zoom route, and just kinda checked all the required boxes without any real issues. But I wasn't employing others, didn't plan to, and didn't have any real complicating factors - I was just in it for the tax advantages. I had one small tax issue that took very little time to clear up, so for me it would have been a massive waste of money to hire anyone to help and worked against the whole idea of saving money as an s-corp, especially because even if you do hire someone you should really still understand what and why they're doing the things they're doing. They still screw things up sometimes, professionals or not. The answer to that is probably "you get what you pay for, hire better lawyers" and that's fine, but then I don't know why you'd bother unless you are really shooting for a significant actual company-like entity.
 
Yeah, that's what it looks like I'm going to do. I met with a guy whose company I've hired on two projects who is hiring me on an upcoming project. He went the S-Corp route and eventually had to hire someone to help. This is a side thing for me for work that I'm doing anyway, so doing an LLC makes sense.
 
Back
Top