S Corp or LLC?

Discussion in 'Business Operations' started by Turfdude, Dec 14, 2002.

  1. Turfdude

    Turfdude LawnSite Bronze Member
    Messages: 1,899

    Afte being in business as a sole proprietor for 14 years (I know way too long), I'm finally making the change. Just wanted to know why others chose one of the above over the other (tax reasons, protection,etc). I am leaning toward the S-Corp, but have till 1/1 to decide.

    Thanks guys.

  2. rodfather

    rodfather LawnSite Fanatic
    Messages: 9,501


    Was a sole proprietor for 8 years before going to LLC early this year. An hour with an attorney explained to me how LLC was much better than S Corp.

    You might want to invest the time...it really helped us.
  3. Fantasy Lawns

    Fantasy Lawns LawnSite Bronze Member
    Messages: 1,912

    An LLC acts in many ways like an “S” Corporation but without some of the paperwork hassles. It can split earnings and ownership percentages. The I.R.S. allows treatment as a partnership or a corporation. The LLC is governed by a contract called an Operating Agreement, which unlike the corporation, ownership in the LLC is governed by an operating agreement, which denotes who owns what percentage of the business. With the S corp share of stock are printed and ownership is passed with these stocks.

    If you want to save on employment taxes, you might want to look closer to an S corporation. An LLC is a limited liability company that shelters its owners from certain debts of the organization. Both gain “flow thru tax treatment”

    As opposed to that of the regular C Corporation, business owners of S Corps only pay taxes from the profits of the business on their personal tax returns.

    I hear a lot of LLCs lately, but it has no extra advantages over an S corporation and subjects the owners to higher employment taxes. In fact some state can be more ….just the publishing declaration & filing fees (2 separate papers for 6 weeks) can cost more

    With an S corporation after you give your self a reasonable salary to its owner and the remainder can be paid as dividend or, more importantly, accumulated for business expansion.

    Neither the dividends nor the accumulated earnings are subject to employment tax. In an LLC, the active members are subject to self-employment tax on their net share of the profits, whether or not the profits are paid to the owners. This means that the members of an LLC that uses $100,000 in profits to buy equipment will pay self-employment tax at 15.3 percent on profits that were retained.

    Either way I would check into your states cost compare to form either avenue (for us in FL to be come an S Corp was $150 set up than $150 each year)

    I would get the advice of a Good CPA whom has access to a good business lawyer to help set up the paper work

    good link worth a peak

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