Forums: Discussions for entrepreneurs and small business.

Hello,

I`m looking to form either an LLC or an S-Corp for an IT Consulting Business I`m looking to start. I currently live in New York and have heard that it may be beneficial to form the business entity in another state like Nevada or Delaware to name a few. Is there any kind of double taxation when you form a business entity in another state? I was just going to form the business entity here in New York until I heard about the supposed benefits of forming businesses in "business friendly states." Comments appreciated...

Thank you,

John

Great topic!  I would also be interested in knowing at what point it becomes a viable option to incorporate in those states.  For example, is it worth it to incorporate in Delaware or Nevade if you earn $50K a year?  $500K?  $5M? 

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Helping new computer users have a safe and fun internet experience. www.newbiesecurity.com

I will only speak of the LLC.  The LLC is a straight-through means of forming an entity that provides both protection of liable threat and financial management of the entity.

You already are aware of the double-taxation issue.  If this is something you wish to avoid....go with an LLC.  The IRS doesn`t recognize an LLC as an individual entity and the financial income the LLC produces is reported directly on your, as the owner, income statement.  This eases the burden of the complicated management of multiple entities.

You are still obligated to keep your records separate and must comply by this if you wish to obtain tax benefits applied to the small business IRS rules.  The IRS classifies LLCs as a "sole proprietorship."

File your LLC in your home state.  Unless you have hundreds of customers and hundreds-of-thousands of dollars in capital, there are no financial or tax benefits going to another state as an LLC.

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Steve
Computer Repair in St Louis and Saint Charles

My experiences with S-Corps were rough. I find it`s much easier to make smarter tax deductions with a C-Corp or an LLC. S-Corporations translate business profit into income for it`s principals - this means the executives of the corporation now have added personal tax liability. This can particularly sting if you have another job. If you`re looking at taking a loss (on paper) for the next few years, an S-Corp might be a good idea because the corporation will not have to pay Social Security on the income.

I spoke to someone briefly and they said a smart setup is to have a C-Corp general partnered with an LLC to get the best of both worlds, but I haven`t gotten the specifics on how that`s structured.

Someone call a lawyer and a CPA :-P - we`re getting boring now


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Dan Pickett
Principal
Enlight Solutions, Inc.

www.enlightsolutions.com
www.twitter.com/dpickett

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