It also depends on the law of the state where you plan to form your business entity. In New York, formation of an LLC can be about ten times more expensive than forming a corporation. I recently posted an article comparing an s corp to an LLC from the New York perspective: http://ratschko.com/free-legal-information-for-new-york-businesses/new-york-business/choosing-between-an-s-corporation-and-an-llc---the-new-york-perspective.html
Colorado is a very small-business friendly state and LLCs are created with a simple online form and a $25 fee. More info for Colorado readers is at: http://www.sos.state.co.us/biz/FileDoc.do
Main reasons not to go LLC for a startup are if you want different classes of shareholders or have complex investment and distribution needs.
Also note that for US Fed taxes there is not an LLC status (LLCs are state entities) so LLCs could typically file like an s-corp (http://www.irs.gov/businesses/small/article/0,,id=137016,00.html)
I recently faced this same dilemma. We decided to go with and S Corp over LLC because of tax benefits. With an S Corp the money you make in salary is taxed at your normal rate. With an LLC, you are considered self employed and have to pay a 15% tax rate. If you don't make tons of money overall, you can save with an S Corp.
We also incorporated in New Hampshire which has very friendly laws all around.
I wrote up our experience as a how to guide here: http://corkboardinc.com/blog/2007/03/12/how-to-create-a-corporation/
I don't think there is a double taxation issue with C corporations. The corporation is taxed on the profits (which is income - expense, and expenses include payroll).
Wish I had read this before we determined what to do with nPost.com. We would have saved ourselves a lot of time, fortunately we went with the LLC.
One other issue is that some companies won't take your contract unless you're a C Corp. I had to this to do consulting for a power company in the USA.
In Texas the cost is the same for all three entities.
One thing to consider with an LLC is its strength as a liability shield. In many states, S-Corps are more tested in this regard. It varies from state-to-state so check with your local small biz development center.
Being based in asia, we require input on forming companies solely to get the benefit of payment services like paypal pro and Google checkout which are available only for US companies. So do i need to have a US company registered as a LLC just to get these benefits ?
how does it work in terms of taxation? how do you measure icome generated out of US for a web service. (location of paying client?)
we are based in asia(hk) and looking to launch our online marketplace shortly. Currently in development atwww.ushops.com/beta.
If you are based in California, the tax treatment of LLC's is unfavorable compared to a sub-S. There is a special tax on the gross income of an LLC and the distributions are treated differently than an S. Also, it takes perhaps 15 minutes a year to handle the board minutes and filings for an early stage S, so please don't pay anyone to do custom minutes etc..Once you file you may get offers in the postal mail from private firms. Ignore them.
I don't believe there are any citizenship requirements to form an LLC -- I'm not a US Citizen (I am a legal permanent resident) and have had no problems in that regard.
@Ajay Dwivedi: Dig around online for a more detailed accounting response, but double taxation is absolutely the curse of a c-corp.
* Form 16 is a certificate issued by the employer at the end of the year and provided to the employee. This certificate provides details of the salary income of the employee and the TDS deducted from the employee's income.
* Form 16 is all you need to file ITR if you have reported all your income to your employer.
* It is your right to obtain F16 from the employer within 15 days time after the end of the financial year.
* Obtain your Form 16 early, so that you can file your return early. The earlier you file, the faster you will get refund.
* Your chance of scrutiny reduces by filing early.
* Ensure that you have F16s from all the employers that you have worked for during the year.
To Ajay re: Double-tax issue of C-corps.
C-corp income is taxed; dividends are NOT EXPENSE ITEMS -they are a distribution of income and are not deductible to derive net taxable income. When a C-corp issues dividends to its shareholders it is a distribution of income that has already been taxed at the corp level. Shareholders receiving those dividend distributions are required to report those dividends on their tax returns as income and pay tax, hence the double-taxation issue. That's why closely-held C-corps will generally try to manage salaries and other benefits/expenses to show little or no income that will need to be taxable to the corp or distributed as 'dividends' to them.
Is it better to set-up a Delaware or California LLC? And can you recommend a good company that handles the formation and registration of an LLC.
I LIVE IN NEBRASKA AND I AM PUTTING TOGETHER A AUTOMOTIVE TOWING ETC COMPANY POSSIBLE THERE WILL BE AN INVESTOR OR I MIGHT ROLL THE DICE AND GO SOLO SHOULD I FORM AN LLC OR INC ? I PLAN ON SEEING PROFIT WITHIN FIRST 6MONTHS ANY HELP SUGGESTIONS WOULD BE HELPFUL
-R FROM NEBRASKA
If you file for an LLC in Delaware, are there any additional documents/forms that you need to file to do business in Mass?
Please advice, if you have had any experience with this.
It depends on which state you file it in. Delaware is generally where most llc's are filed its about 200$.
WHAT WOULD BE YOUR ADVICE TO ME IF I'M JUST STARTING A SIDE JOB COMPANY THAT CONSIST OF MAYBE 6PPL MAX. OUR SIDE JOBS INCLUDE FROM JUST CUTTING PALM TREES TO LANDSCAPING (KEEP IN MIND EVERYONE STILL HAS A FULL TIME JOB, THIS IS JUST A SIDE JOB, AFTER WORK OR ON DAYS OFF). SO WHAT DO YOU THINK, INC, LLC OR DON'T NEED ANY? THANK YOU.
I am thinking of incorporating. I am wondering if both are considered entities aside from the owner or ceo of the company
I am getting ready to start my own business flipping real estate, along with performing other real estate deals. Should I get an LLC?