Me and another guy have been doing business for a couple of years (computer stuff). Right now we just have a Tax ID, but we need some liability. We are partners, but we may not always have equal responsibility, and we may hire an employee in the future.

The most important things are taxes and liability. Which would be better in NC... an LLC or an S-Corp?

Justin

8/8/2006 9:25:20 PM

LLC

8/8/2006 9:40:43 PM

Glad to see you're in business for yourself.

My experience is mainly with being in a LLC. The LLC set-up allows you to pass profits to the members as with a partnership, with some limits on your liability. Make sure you decide on and include all the important issues when writing your "articles of organization". That is your company's rule-book so to speak. You and your partner are bound by the rules of your LLC, so be careful.

An unfortunate but hard-to-avoid disadvantage is that the really important business relationships you will get involved with, such as leases and loans, will require you to personally guarantee contracts. This essentially nullifies the financial protection your LLC gives you. But often, if you want to move ahead, you have to do what you have to do.

8/8/2006 9:53:05 PM

S-Corp.

With an S-corp you get the same protection as an LLC and you also get the neat ability to pay yourself corporate dividends (a la John Edwards) which are taxed at a preferential rate and avoid the self-employment tax. Of course that will reduce your benefits from social security, but I consider that a great thing. Its one way to opt out of the system that isn't joining a railroad workers union or the United States Congress.

8/8/2006 10:14:16 PM

Thanks for the advice. So, with an S-Corp you don't have to personally guarantee loans and leases? We have very few expenses, and no office, so that isn't a problem right now. However it is something important to think about for the future.

I did some reading online, and one thing I keep running into is this: With an LLC you can split profits unevenly, but with an S-Corp you cannot. What does this mean?

A couple years ago I created an LLC out of Delware, but I can't remember why. Is this a good option for someone who does 100% of their business locally? Do I still have to pay any NC dues or do paperwork locally if I do this?

8/8/2006 10:17:26 PM

bgmims, just saw your reply. We were posting at the same time.

Hmm... sounds like I need to talk to an accountant.

8/8/2006 10:19:59 PM

Honestly, get a lawyer to draw up your LLC/S-Corp. They can give you the tax advice/specifics that you are looking for. I don't think an accountant can tell you crap about liability from a corporation.

Its also good to have an attorney that is semi familar with your business on hand for future problems that can arise.

8/8/2006 11:15:36 PM

^
Excellent advice.

8/8/2006 11:18:23 PM

This thread technically belongs here in soap box, according to the descriptions of the forums.

in practice, though, you might have better luck in the Lounge. I'll move it if you want. Your call.

8/8/2006 11:20:18 PM

Sure, let's move it over there and see what we get! Thanks.

8/9/2006 3:05:28 PM

One thing I don't understand about S-Corps is this: the money you make is considered dividends, based on the shares that you own in the company.

The problem with this is that my partner and I get payed by how many hours we work. There is a chance that he will only work 2 hours in a week, and I will work 20. If it's based on shares, then that won't work. Am I understanding this correctly?

8/10/2006 11:47:26 PM

You may employ yourselves and pay yourselves hourly wages or a salary. These wages are treated as company expenditures.

Profits are capital gains after all liabilities are satisfied (wages, rent, licensing fees, other business expenses). These are divided equally among shares.

8/11/2006 12:06:55 AM

quit asking the fucking wolfweb. what you need is a lawyer & an accountant. good luck running a buisness if you can't see that.

8/11/2006 1:16:28 AM

Get a CPA, you'll need one for the future anyway. When you consult for the 1st time, describe your circumstances and he/she will tell yo wheter to go S-Corp or LLC.

Here's the thing, I thought you had to have that already indicated when you applied for a Tax ID, but maybe my memory isn't serving me well. I started an S-Corp a few years ago.

8/11/2006 10:18:12 AM

you do have to put that (LLC, SCORP,...) on the application.


you cant just get a tax id for the hell of it.

8/11/2006 10:24:54 AM

Quote :

"You may employ yourselves and pay yourselves hourly wages or a salary. These wages are treated as company expenditures. Profits are capital gains after all liabilities are satisfied (wages, rent, licensing fees, other business expenses). These are divided equally among shares."

Hit the nail on the head.

You have to think of a Corporation as an entity, it's own thing. First off you need to decide which one of you will have controlling interest in the company 51/49 split, because you DO NOT want to have an even split. And no you dont have to personally garauntee loans and leases, that's the big point of incorporating, you limit personal liability.

Next you set both of you up on a salary, which can be hourly or fixed rate, whatever you decide, and you can change it at any time.

You will also need to get general liability insurance and workers compensation insurance for the company.

8/11/2006 11:22:09 AM

GET A LAWYER

8/11/2006 11:35:41 AM

Quote :

"Honestly, get a lawyer to draw up your LLC/S-Corp. They can give you the tax advice/specifics that you are looking for. I don't think an accountant can tell you crap about liability from a corporation."

lol, what do you think cpa's do exactly?

Quote :

"quit asking the fucking wolfweb. what you need is a lawyer & an accountant. good luck running a buisness if you can't see that."

both of which exist on the wolfweb

[Edited on August 11, 2006 at 1:17 PM. Reason : d]

8/11/2006 1:17:07 PM

getting a lawyer for forming a corporation is a complete waste of money, if anything ^ is right, go see an accountant.

but you really dont need either. GOOGLE it.

8/11/2006 1:59:28 PM

Quote :

"you cant just get a tax id for the hell of it. "

r u fucking stupid?

8/13/2006 10:16:31 PM

jesus christ... hahahaha

call a lawyer about this, man. if you need, i can refer you to an excellent attorney that does this sort of thing for a living, and has done so for a long time

he's gonna be better than some douche on tww talking out his ass...

8/13/2006 10:20:37 PM

no need to pay a lawyer, seriously.

google it.

companies out there that will step you through becoming an s-corp cheap.

if going llc, do it yourself.

googlellelelelelglglooogogogle

8/13/2006 10:40:47 PM

any attorney worth a fuck won't charge you to talk to you about it. i'd at least get a consult before i hit up google on my own...

8/13/2006 10:43:13 PM

Thanks for all the info. Very helpful, and I understand much better now. I did speak with an accountant, and she suggested doing an S-Corp. It does seem like that will be the best option, based on what I've read online and in this thread.

8/14/2006 12:52:59 AM

Quote :

"r u fucking stupid? "

yeah, im real fucking stupid. i only have a business degree, 3 companies registered by myself (all of which gross at least a qtr. million a year), and a $140,000 townhouse.

please peekseeker, i would love for you to tell me something that i dont know about setting up, and/or running a business.

I need something to laugh at today. Please try to drop some knowledge on me.

[Edited on August 14, 2006 at 10:37 AM. Reason : oh, and im only 25]

8/14/2006 10:33:58 AM

Quote :

"lol, what do you think cpa's do exactly?"

They don't form LLCs.

8/14/2006 2:23:58 PM

Noen mentioned that we would need to get general liability insurance and worker's compensation insurance for the company. Are these things required? Right now, we don't really feel that we need either of those, as we are small and have no employees. I agree that it would be a smart thing to get in the future, but just not as we're starting out.

8/14/2006 6:22:05 PM