HELP!! For-Profit, Non-Stock Corporation vs LLC

r3t1awr3yd · May 25, 2012

I've read as much as my brain will absorb from google... can any one help figure out the differences?

They both get rid of personal reliability but I like the way corporations pay taxes vice an LLC.

I can't figure out which route I should take though... Help!

:dunno

Angelo · May 25, 2012

r3t1awr3yd wrote: »

...They both get rid of personal reliability...

personal reliability?

what are you trying to accomplish and why?

there are many various reasons and conditions for anyone to consider incorporation and many conditions vary depending on your state of residency. all best dealt with by professional accountants or attorneys.

r3t1awr3yd · May 26, 2012

Angelo wrote: »

personal reliability?

what are you trying to accomplish and why?

there are many various reasons and conditions for anyone to consider incorporation and many conditions vary depending on your state of residency. all best dealt with by professional accountants or attorneys.

I must have typed this in haste. I meant to say "personal liability". My brain's fried with all the reading I've been doing.

Besides the tax payment structure difference between an LLC and a Corp, I don't see the real difference between these two types of business structures. *whew*

Dan7312 · May 26, 2012

Just keep in mind that as a small LLC or corp some places you deal with may require your personal guarantee, just as though you were a sole proprietor. They know a small company has no resources and if things go south they have no leverage without that personal guarantee.

Even without the personal guarantee there are some things you can be personally on the hook for anyhow.

If your goal is to eliminate personal liability and the costs associated with it you really should check with an accountant/lawyer who understands LLC/sub S in your state to see if it will work in practice for the way you do business. It's cheaper and less complicated to just be a sole prop.

r3t1awr3yd wrote: »

I must have typed this in haste. I meant to say "personal liability". My brain's fried with all the reading I've been doing.

Besides the tax payment structure difference between an LLC and a Corp, I don't see the real difference between these two types of business structures. *whew*

Sam · May 26, 2012

Think about operating as a sole proprietor. No worries about attorneys, massive amounts of paperwork, additional forms to fill out etc.

Worried about personal liability..................I have a million dollar liability coverage insurance. Hard to see how a small photography business can incur more than that.

Plus the LLC and corporate monickers don't offer total unlimited protection.

Sam

Angelo · May 27, 2012

also, a corporate filing can cost a hefty fee in most states. in CA I believe it's $700 and that's just the annual filing fee.

as for liability issues: keep in mind that these days it's harder to fully shield yourself against responsibility when facing certain matters of law. the cost of setting up and maintaining a C-corp or LLC, as well as the inherent taxation is probably much more than simply carrying a good insurance policy.

you need an accountant and/or attorney to guide you in these matters

.

ChatKat · June 3, 2012

Angelo, The minimum Franchise Tax in California is $800.

It all depends on your personal tax situation, what deductions you have, what the assets you have and want to protect.

The the realm of taxes, when you file a return as an LLC you actually file a schedule C which is the same tax for you file as a Sole Proprietor. Plus in California you file the minimum Franchise Tax to the State of California. In some cases you might even pay a Gross Receipts tax for your LLC.

There is no one size fits all entity. For example, if you have a lot of personal medical expenses that you cannot deduct on your personal tax return, a Schedule C might be worth your tax dollar savings.
However, you need to be careful that you take all the profit out of your business so you don't pay tax at the corporation's federal tax rate..

The S Corporation Election doesn't allow you to take medical expenses. Corporations are not audited as frequently as Sole Proprietorships are. S-Corps are audited more frequently than C Corporations.

Go see a CPA that you trust to help you make the correct determination for YOU. And don't ask a photographer for tax advice. You don't pull your own teeth when you need a dentist. Most photographers don't have the right tools to give you tax advice.

r3t1awr3yd · June 4, 2012

ChatKat wrote: »

Angelo, The minimum Franchise Tax in California is $800.

It all depends on your personal tax situation, what deductions you have, what the assets you have and want to protect.

The the realm of taxes, when you file a return as an LLC you actually file a schedule C which is the same tax for you file as a Sole Proprietor. Plus in California you file the minimum Franchise Tax to the State of California. In some cases you might even pay a Gross Receipts tax for your LLC.

There is no one size fits all entity. For example, if you have a lot of personal medical expenses that you cannot deduct on your personal tax return, a Schedule C might be worth your tax dollar savings.
However, you need to be careful that you take all the profit out of your business so you don't pay tax at the corporation's federal tax rate..

The S Corporation Election doesn't allow you to take medical expenses. Corporations are not audited as frequently as Sole Proprietorships are. S-Corps are audited more frequently than C Corporations.

Go see a CPA that you trust to help you make the correct determination for YOU. And don't ask a photographer for tax advice. You don't pull your own teeth when you need a dentist. Most photographers don't have the right tools to give you tax advice.

You said a lot of what I've already read from the IRS.

A single member LLC IS a sole proprietorship.

You've already mentioned the Schedule C which is all you have to add to an LLC but you have to do your taxes with your regular taxes (if you have a day job also) meaning you pay extra taxes on the extra money you make but it works out if you take a loss (which doesn't make your company look good and subjects you to more audits, as you mentioned. many people use this to cheat the irs).

As a Corp, your tax obligation can be deferred based on your gain or loss depending on situations again lined out by the IRS.

As other have said, I need to speak to an accountant but I was hoping to hold off on that for as long as possible. I'm thorough when it comes to research

ChatKat · June 4, 2012

A single member LLC IS a sole proprietorship.

You've already mentioned the Schedule C which is all you have to add to an LLC but you have to do your taxes with your regular taxes (if you have a day job also) meaning you pay extra taxes on the extra money you make but it works out if you take a loss (which doesn't make your company look good and subjects you to more audits, as you mentioned. many people use this to cheat the irs).

As a Corp, your tax obligation can be deferred based on your gain or loss depending on situations again lined out by the IRS.
Wally - some of your info is incorrect.

A Single Member LLC is an LLC. They file a Schedule C to report their taxes. They are NOT the same.
As a Corportation - your taxes are not deferred. You must file each year by March 15th.

As an accountant and a photographer, I do not recommend you wait because the time to seek information is before you operate as a business - not afterward when you are already earning money.

Foques · June 4, 2012

ooh really interesting convo here! I was wondering this myself.
Kathy, what do you think is the best fit for a one man shop kind of photographers?

ChatKat · June 4, 2012

None!
Sorry, there is no stock answer because there are so many things that come into play.

A sole proprietorship is heavily audited 5-10% of small business gets some form of audit and less favorable tax treatment.

LLC's file the same form or a partnership or Corp form. Some states have additional taxes on LLC's

Corporations come in two flavors - S Corp and C Corp and choosing the right one depends on your situation.

Even some accountants have personal preferences for their clients.

Foques · June 4, 2012

oh dear.
In that case, here is a question for you.. Who would be a good person to help in figuring this out?
Is it an accountant who would assist with "suggesting" what legal body to go for or a different career line?

ChatKat · June 5, 2012

Cpa
The best person to talk to is a CPA; They would be able to analyze your tax return and help you decide.

HELP!! For-Profit, Non-Stock Corporation vs LLC

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