There are numerous reasons one may prefer LLC versus S-CORP, they are vastly different. The commonality is that both allow losses or profits to funnel over to personal returns, without double taxations, and for multi-income families to reap tax dedication benefits sooner. A major difference is that SCorp can't have stock holders that are companies, where as I think LLCs can. These are important factors when thinking about who will likely finance the company, and who would likely be stockholders eventually. Many choose S-CORP over LLC, jsut because its really easy to incorporate the S-Corp. Its a simply document, because terms can be defined after the fact modifying a seperate document than the initial Arcticles of Incorporation. With a LLC, planning on having multiple partners, it can be complicated upfront because you have to define all the details in the Corporate Docs upfront. Sure it can be changed, but it means changing the primary Corporate Docs, which has more cost and Beurocracy to do. SCorps have more limits (maybe on revenue or time/?) before structure has to be converted to a C-Corp. When the company is sold, what gets taxed and doesn't may differ dependant on S-corp versus LLC. I'd have to go back and re-review the books, to clarify the details with certainty, its been awhile. But your corporate status is both an accounting decision and a legal decission, so it should be addressed with your accountant in advanced, after discussing your primary business goals..
Tom DeReggi RapidDSL & Wireless, Inc IntAirNet- Fixed Wireless Broadband ----- Original Message ----- From: "RickG" <[email protected]> To: <[email protected]>; "WISPA General List" <[email protected]> Sent: Thursday, June 04, 2009 12:04 AM Subject: Re: [WISPA] Legal Entity - which type? Was: Quesiton onFunding/Financing / Capital Availability Correct, compared to C-Corps. Is there and advantage of LLC versus S-Corp? -RickG On Wed, Jun 3, 2009 at 5:36 PM, Scottie Arnett <[email protected]> wrote: > S-Corps get rid of the double taxation...but you are limited to how many > shareholders you can have and some other limited things. > > Scottie > > ---------- Original Message ---------------------------------- > From: "Marlon K. Schafer" <[email protected]> > Reply-To: WISPA General List <[email protected]> > Date: Wed, 3 Jun 2009 08:23:37 -0700 > >>Melissa does work at an accounting firm..... She's not the CPA but she >>does >>most of the paperwork etc. And, naturally we work very closely with the >>CPAs at the firm. >> >>We've looked at the money differences between sole proprietor and corp. >>There really isn't much difference if you stay honest with things. At >>least >>not at the low levels we're at. >> >>When we start making more money (in the next couple of years as things are >>sitting now) we'll likely be better off as a corp. Because the current >>business doesn't actually own anything we'll be able to easily set things >>up >>so that the corp rents things from us. The office, vehicles etc. In that >>way we can personally take some of the income while the corp writes it >>off. >> >>The way you juggle things to keep taxes down is to work the tax brackets. >>Right now we're able to stay in a pretty low one. But I'm running out of >>places and ways to expand so that's going to change. We'll pay less taxes >>when we have two smaller entities in smaller brackets. At least that's the >>way I understand it now.... >> >>One of the really great things about a sole proprietorship is asset >>management. We can take old computers home all day and it's no big deal. >>Just move it. If it's something owned by the corp we have to somehow >>transfer that product. More paperwork etc. >> >>Another thing a person has to be very careful with is who owns what. Mom >>and Dad own a large farm. Thousands and thousands of acres, mostly >>irrigated. Back when their corp got formed all of the assets were put into >>the corp. Now that they want to sell the farm they have to somehow make >>nearly twice as much because they'll be double taxed at the time of the >>sale. There will be income tax at the corp level AND capital gains at the >>personal level. Or some such similar mess. Basically when they sell 50% or >>so will to go taxes. Unless they can sell the corp it's self which is >>something no one wants to buy. People only want the assets, otherwise they >>end up with the same long term tax mess. It's also nearly impossible to >>gift enough assets back to themselves or their kids to make a difference. >> >>Both sole owner and corp have their places. The choices are not REALLY as >>simple as some people try to make them out. And how they get structured >>over the long run is very important yet almost no one ever goes to a >>lawyer >>that specializes in such things for advice on the best type of corp to >>form >>and how to run it from day one. Many things get done just because that's >>they way it is, even if there is a better way...... I still look at my >>avoidance of routing cpe. The reasons I liked bridging cpe have proven to >>be very true (radios are inflexible crappy routers) but the benefits have >>been wonderful anyway. It's something I wish I'd have listened to others >>on >>years and years ago. Human nature I guess. I am listening to the experts >>on tax matters though. grin >> >>marlon >> >>----- Original Message ----- >>From: "George Rogato" <[email protected]> >>To: "WISPA General List" <[email protected]> >>Sent: Wednesday, June 03, 2009 2:38 AM >>Subject: Re: [WISPA] Legal Entity - which type? Was: Quesiton on Funding >>/Financing / Capital Availability >> >> >>> Unless you actually make a decent salary. >>> When your a sole proprietor you have to pay the self employment tax. >>> Self employment tax is matching social security payments. >>> You pay both the individual ss tax and as well as the employers >>> contribution which comes to about double. >>> >>> If you were incorporated and you were an employee, which you would be, >>> you could collect half your pay in salary and the other half in >>> dividends, or 1/4 in salary and 3/4 in dividends (which yields a deeper >>> tax break) >>> >>> Dividends are not subject to the 2nd half of the contributing tax or the >>> self employment tax, never mind workers comp, state unemployment, etc. >>> >>> For those that rant and rave against the big bad government and their >>> unreasonable taxes (count me in), then it's foolish to voluntarily pay >>> what is not required of you. >>> >>> But to all those that do go ahead and pay the extra not required ss tax, >>> My family and all the rest of those who will someday collect ss in our >>> golden years thank you for being so generous as paying this extra >>> voluntary tax to help insure the solvency of ss so it will be there when >>> we retire as well as give the government even more money to borrow >>> against so they can spend even more tax dollars that really aren't >>> there. >>> >>> Also, if you have a good cpa, they tell you this stuff when they do your >>> income taxes. >>> >>> a cpa is not a tax preparer or a book keeper. >>> >>> >>> >>> >>> >>> >>> >>> RickG wrote: >>>> Makes sense to me...thanks! -RickG >>>> >>>> On Tue, Jun 2, 2009 at 11:32 PM, Marlon K. Schafer >>>> <[email protected]> >>>> wrote: >>>>> Let me get my accountant wife to answer that one. Here's Melissa.... >>>>> >>>>> Well, for us it's not yet in our best interest to incorporate. >>>>> Sometimes >>>>> the reason for incorporating is to help insulate the individual from a >>>>> lawsuit - but usually if the corp is sued, they also sue the owner of >>>>> the >>>>> corp. I agree with you about the S-Corp - the income from an S-Corp is >>>>> picked up on your personal return so there aren't usually as many >>>>> advantages >>>>> when doing tax planning. We have not incorporated because the cost of >>>>> being >>>>> a corp (accounting, legal, another set of books, more time on >>>>> Melissa's >>>>> part >>>>> to work on the books...) is greater to us right now than the benefits. >>>>> I >>>>> see it as something that we will probably need to do in the future as >>>>> our >>>>> income increases and we need to do more tax planning. Hope that >>>>> helps..... >>>>> Melissa >>>>> >>>>> There ya have it! >>>>> marlon >>>>> >>>>> ----- Original Message ----- >>>>> From: "RickG" <[email protected]> >>>>> To: "WISPA General List" <[email protected]> >>>>> Sent: Monday, May 25, 2009 12:02 PM >>>>> Subject: [WISPA] Legal Entity - which type? Was: Quesiton on Funding >>>>> /Financing / Capital Availability >>>>> >>>>> >>>>> Ha! Another interesting topic! In the past, when doing business for >>>>> myself, I legally filed as a sole-proprietor. When I got into the WISP >>>>> business, for a multitude of reasons, I became an "S-Corp". After >>>>> filing my taxes, it seems to be much simpler and possibly more >>>>> advantageous to just be a sole-proprietor. But that goes against all >>>>> advise I receive. >>>>> Marlon, I'm actually surprised that you are a sole-proprietor. What >>>>> benefits have you found by remaining so? >>>>> -RickG >>>>> >>>>> On Mon, May 25, 2009 at 11:54 AM, Marlon K. Schafer >>>>> <[email protected]> wrote: >>>>>> One more thing. I don't agree with your definitions per se'. >>>>>> >>>>>> We all have businesses. A proprietorship is a TYPE of business. We >>>>>> are >>>>>> a >>>>>> proprietorship because I'm not incorporated (incorporating is over >>>>>> rated >>>>>> and >>>>>> expensive to do right). I'm still a business though.... >>>>>> >>>>>> http://en.wikipedia.org/wiki/Business >>>>>> >>>>>> http://en.wikipedia.org/wiki/Sole_proprietorship >>>>>> >>>>>> http://en.wikipedia.org/wiki/Asset >>>>>> >>>>>> marlon >>>>>> >>>>>> ----- Original Message ----- >>>>>> From: "Charles Wu" <[email protected]> >>>>>> To: "WISPA General List" <[email protected]> >>>>>> Sent: Sunday, May 24, 2009 10:03 PM >>>>>> Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital >>>>>> Availability >>>>>> >>>>>> >>>>>>> Hi Marlon, >>>>>>> >>>>>>> I think it's appropriate to make a few definitions and distinctions >>>>>>> on >>>>>>> things so everyone is on the same page >>>>>>> >>>>>>> Specifically, for purposes of making my point, I define >>>>>>> >>>>>>> Proprietorship: A commercial activity engaged in as a means of >>>>>>> livelihood >>>>>>> or profit >>>>>>> >>>>>>> Business: A unique system of processes and procedures that documents >>>>>>> and >>>>>>> codifies a specific method of proprietorship >>>>>>> >>>>>>> Asset: cash, inventory, equipment, infrastructure, customer >>>>>>> contracts, >>>>>>> brand, marketing, etc >>>>>>> >>>>>>>> Grin. Sure it is. That's what a LOT of small business people do. >>>>>>>> It's >>>>>>>> also kind of common for doctors, dentists, plumbers etc.... >>>>>>>> Sometimes >>>>>>>> it >>>>>>>> sucks, >>>>>>> Now, everything you stated above is just a method of proprietorship, >>>>>>> and >>>>>>> in most cases, from a sale perspective, a proprietorships isn't >>>>>>> worth >>>>>>> anything more than the depreciated value of its assets >>>>>>> >>>>>>> Say you were buying out the local plumber's office -- what would he >>>>>>> have >>>>>>> of value? His truck? Some old tools? A customer list / brand perhaps >>>>>>> (but the reality of things is that customers do business with him >>>>>>> because >>>>>>> of him, and if you bought him out and he moved out of town, those >>>>>>> customers would probably go back to being on the open market) >>>>>>> >>>>>>> Now, in comparing the WISP 'proprietorship' vs. the plumber, it's >>>>>>> worth >>>>>>> noting that the WISP is somewhat unique in that it results in the >>>>>>> creation >>>>>>> of an independent asset that holds onto a lot of value (e.g., the >>>>>>> recurring revenue and everything that goes to support it); in many >>>>>>> ways, >>>>>>> this is akin to real-estate >>>>>>> >>>>>>>> Not >>>>>>>> everyone out there even wants to get that big (if I had a nickle >>>>>>>> for >>>>>>>> every >>>>>>>> business owner that's told me the most fun they had and the most >>>>>>>> money >>>>>>>> they >>>>>>>> made was when it was just them, no employees......) But then again, >>>>>>>> that's >>>>>>>> one of the really cool things about this buisness, it's big enough >>>>>>>> and >>>>>>>> flexible enough to allow many different business models and >>>>>>>> operator >>>>>>>> dreams >>>>>>>> to bear fuit! >>>>>>> True...and you have the added benefit of building an asset that has >>>>>>> value >>>>>>> (be happy we're not plumbers =) >>>>>>> >>>>>>> -Charles >>>>>>> >>>>>>> >>>>>>> >>>>>>> >>>>>>> >>>>>>> -------------------------------------------------------------------------------- >>>>>>> WISPA Wants You! 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