Accounting & Bookkeeping & Small Business Forum

Guest · Posted: Wed Jul 21, 2004 4:45 pm Post subject: Opinion on Forming an LLC

Hi all. I am trying to decide whether or not I need to form an LLC for my bookkeeping business. My question is: Should I choose to be taxed as a Corporation or choose to be 'disregarded as an entity'? Is it best to take draws or be set up as an employee? Thanks for your help.
James

Guest · Posted: Wed Jul 21, 2004 7:34 pm Post subject: RE: Opinion on Forming an LLC

That is easy to answer.

It depends. What are you trying to establish by your business organization? What state do you do business in? Do you need outside expertse in the business? Do you need outside funding? In my case the deciding factor was simplicity of filing and cost. I am located in Minnesota and the fees in Minnesota is one time $135.00. I get free health insurance as does my wife and she has disability and life insurance so I do not need a business deduction for these items. I would suggest you talk to a CPA in your home state and discuss this with him/her. I would not go to an attorney to decide what form to take because I have found they will automatically establish you as a Corp. I have seen this done when it was not the best fit for the business owner but it sure generated a big fee for the attorney. By the way, this advice pertains only in deciding what business form to take. I still recommend my prospects contact an attorney to actually draw up and maybe even file the paperwork.
UNLIKE SOME ACCOUNTANTS, I WILL NOT DRAW UP THE PAPERWORK. IF SOMETHING GOES WRONG THE FIRST ONE THE BUSINESS OWNER WILL BLAME IS YOU. I ONCE HAD A OWNER TELL ME THE FAILURE OF HIS PARTNERSHIP WAS HIS ACCOUNTANTS FAULT BECAUSE THE ACCOUNTANT SHOULD OF KNOWN THAT THE PARTNER WAS A CROOK.

Guest · Posted: Thu Jul 22, 2004 12:20 am Post subject: RE: Opinion on Forming an LLC

Thanks for your response. If I decide to form an LLC and choose to be taxed as a Corporation, then would I file form 1120 just like a C Corp? And as a Corporation, any money I paid myself would be paid as an employee and the Corporation would be paying payroll taxes, etc.? I would not want to pay dividends because of the double taxation, if I understand for sure how that works. NOW, If I choose to be 'disregarded as an entity' then I would report the income and expenses on schedule C of my personal return, is that correct? Then I would be paying self employment tax on the profits of the company but not necessarily what I draw from the company? Am I at least on the right track here? Thanks again for any thoughts about this.
James

Guest · Posted: Thu Jul 22, 2004 2:51 am Post subject: RE: Opinion on Forming an LLC

James,

You are on the right track. For tax purposes, if your business it’s a LLC you could file as an individual (SCH C) or as a partnership if your LLC has more than one member. And you can also make the choice to be treated as a Corporation. In my case, I choose to file as an individual to make my life easier. And you always get the limited liability so to me it’s the best of both worlds. I hope this help.