Holly, I think for small web businesses you will probably find that most choose either Sole Proprietor or LLC. This is merely speculation on my part. How each individual state treats LLCs varies. As stated, in Texas LLCs are subject to Franchise Tax.
I would chose LLC over SP if you are serious about growing the business. The code allows for single member LLCs so number of owners is not an issue. Yes the filing requirements are more stringent and organizing is more costly, but the personal liability issue should not be taken lightly. Especially if you plan to have employees or work with subcontractors. The law says that if you are a sole proprietor, your personal assets are at risk. With S-Corp, LLC, Partnership and C-Corp that is not the case. It is very difficult to pierce the corporate veil and go after the owner's personal assets. Sure you are still at risk, but only to what you have invested in the company. They can't come after your home, etc. The law holds pretty firm on this and for good reason. It has to ensure investors/owners that their risk of loss is limited. Where the "corporate veil" has been challenged in recent years is when it comes to wholly owned subsidiaries and related entities (Partnerships that participate in other partnerships. Two corporations owned by the same parent corporation). One business may be owned by or be a sibling to another company and still be liable in some extreme cases. So, this is just my opinion, but I would choose an LLC for a number of reasons. kah On Sat, Aug 22, 2009 at 5:00 PM, Holly Fortenberry < [email protected]> wrote: > Yes Keith, I know you are right and I do indeed plan to find a good tax > attorney. And, you confirmed what I have read in several books that S-corps > and LLCs are flow-through entities. I just thought maybe there might be a > trend among small business web developers as to which model they actually > chose for their own businesses. > > Keith Aric Hall wrote: > > I disagree as well. > LLCs are not the same as C-Corps. Your point about tax benefit of LLC vs > C-Corp is incorrect as well. The IRS does make a distinction. As I described > earlier, S-Corps and LLCs are flow-thru entities. You do not pay a corporate > income tax. Instead the tax is paid at the individual level only. > As for the state of Texas. An LLC is subject to Corporate Franchise Tax > as you alluded. > > Again, my advice is to consult with tax/legal professionals if you really > want to know the best entity to choose for your situation. The tax code is > vast and complex and it changes each and every year. Don't just rely on > information you read in the group threads. Some of it, though written with > good intentions, is just plain inaccurate. > > kah > > On Sat, Aug 22, 2009 at 3:29 PM, Terry Brown <[email protected] > > wrote: > >> >> Well, except that last part - advice of the SBDC. >> >> Sent from my iPhone >> >> On Aug 22, 2009, at 3:07 PM, ferodynamics <[email protected]> wrote: >> >> > >> > The LLC is the more modern form of the corporation. >> > >> > I think one big difference with LLCs, they don't have shares of >> > stock. If you read about corporate shares of stock you'll see there >> > are so many potential problems, I personally wouldn't touch that with >> > a 10-foot pole. >> > >> > The IRS doesn't care if you're an LLC or a Corporation, they see no >> > distinction, so no advantage one way or the other--just one big >> > disadvantage for LLCs and corps: more paperwork. The "s-corp" is an >> > IRS-specific term that has nothing to do with filing your articles of >> > incorporation, in other words: more paperwork and probably more >> > scrutiny if there's really a tax savings. >> > >> > I don't think there is much tax benefit to forming an LLC unless you >> > figure out all the "corporate lunch" loopholes that probably don't >> > apply to a small business anyway, good luck with that. As an LLC you >> > end up paying a higher "business rate" for everything, plus there is a >> > business tax you're going to pay to Texas every year, I forget the >> > name of it now--ask your accountant :-) >> > >> > As far as liability protection, this is a myth, just look up the >> > lawsuits yourself. If you're a small business, it's obvious to the >> > court who is at fault: you! I believe you only get liability >> > protection with a large business where it is not as clear who is >> > liable, but even then, good luck! >> > >> > I'm not a lawyer but I did just finish a business law class and spent >> > a fair amount of time on the IRS website, Secretary of State website, >> > reading books, etc. So my advice: as long as your business is small, >> > stay a Sole Proprietor and stay out of trouble and pay the self- >> > employment tax with a smile on your face. Texas State has a Small >> > Business Development Center and their advice is probably better than >> > mine, they have offices in Austin and RR - >> http://www.business.txstate.edu/sbdc/ >> > > >> >> >> > > > -- > Keith Aric Hall > > http://www.keitharichall.com/ > twitter: keitharichall > > > > > > > -- Keith Aric Hall http://www.keitharichall.com/ twitter: keitharichall --~--~---------~--~----~------------~-------~--~----~ Our Web site: http://www.RefreshAustin.org/ You received this message because you are subscribed to the Google Groups "Refresh Austin" group. [ Posting ] To post to this group, send email to [email protected] Job-related postings should follow http://tr.im/refreshaustinjobspolicy We do not accept job posts from recruiters. [ Unsubscribe ] To unsubscribe from this group, send email to [email protected] [ More Info ] For more options, visit this group at http://groups.google.com/group/Refresh-Austin -~----------~----~----~----~------~----~------~--~---
