Incorporating or LLC?
 

I'm looking at incorporating my web design business in order to limit by personal liability. I'm also finding that companies prefer to to do business with another legal entity instead of a fly-by-night 1 man operation. I'm eventually going to look into copyrighting and trademarking a significant amount of the information/websites/CMS I generate for the Internet community. I'd like for that information and other intellectual property to be registered to a corporation. Moreover, I'd be able to register domain names to a company...

There are plenty of benefits, I think, but I don't know where to start looking for more information. Google and Yahoo are *filled* with sites that'll "do it quick and easy" etc etc. and that's just making things hard on me. I'd like to find some explanations written in plain English about the benefits of incorporation, and how to do it. These INC-building businesses are only feeding me lines... I want to know what this will do to my personal IRS forms, etc. I need to learn.

Thanks in advance, folks.
-tritium

Although my knowledge is rather limited, I can probably help with a couple pointers..

LLC stands for limited liability company, and if you set one up in either Nevada or New Mexico, it can be set up annonymously.

The only other thing I can offer is that to set one up, you would need to speak with a lawyer. Generally, they are pretty quck and easy to set up, with nominal fees.

I went with an LLC in florida. Long run, the paperwork is much less. You dont have to keep meeting minutes. You dont have to file federal taxes every quarter (if you file taxes as a partnership).

There are plenty of good books that you can buy that will guide you through the process. Its pretty pointless to use one of the services as its a learning process and your much better off learning about it from the get go.

Look for an LLC book by a publisher called NoLo.

I dont know about the copyright laws where you are, but in Canada everything is automaticly copyrighted

The Tilted Living thread has an Ask the Lawyer thread -- you might want to run your question by him.

Since many lawyers do handle incorporations, he might be able to give you the top 10 reasons why you should, or top 10 why it doesn't matter.

Unfortunately, it's more of a tax question than liability. Either one will cover your butt, more or less, on the personal liability side.

Talk to an accountant first, then lawyer. An accountant will be cheaper by far, and then you just tell the attorney what to do in order to complete the filings.

And I absolutely did not answer your original question. Dear God, what's wrong with me? Anyways, I'll try to post some answers tomorrow.

I'm interested in this exact subject as well. I'm looking at either an LLC or an S Corp. Both have the advantage of no double taxation, but I've heard and S Corp is less to do in terms of paperwork than an LLC.

Also I've heard a lot about incorporating in Deleware. Anyone have any hints on this?

I've only got a few minutes, so I'll jump in here real quick.

LLC - no required salary.

S Corp - shareholder that works is required to take a salary. So, W-2, 940 and 941, state forms, etc. need to be filed at least quarterly.

Initial paperwork is about the same.

And as far as incorporating in other states without income taxes - this is kind of a myth. Oregon has a "throwback" law, for example, where income that would not be subject to taxation in another state will be "thrown back" into Oregon for tax purposes. Also, for multi-state taxes you apportion your income based on a few things.

Revenues
Rents for real property
Inventory
Fixed assets

So you might be incorporated in another state, but if you are essentially running it fro myour home state, all the income should be apportioned back anyways. So....unless you blatently lie on your tax forms, you wind up paying the same tax. Not to mention creating nexus in other state taxation districts, which is a whole 'nother thread.

The only convincing argument I've ever heard is that an INC (S or C Corp) has a decades of legal precedence to rely on if you're sued. This precedence prevents your from being held liable for the acts of your corp. LLC doesn't have nearly the case history behind it.

I'm back....days later.

C corp - taxed at corporate level, dividends taxable, you take a salary. Can have different kinds of stock. Liability protection. Can have any year end, need to file an 1120. Has it's own tax rate structure, but beware being classified a personal service corp.

S corp - taxed at shareholder level, dividends (for the most part) nontaxable, must take a salary. Cannot have preferred stock or different kinds of stock. Liability protection. Can elect to have different year end than 12/31 if there is a valid business reason to do so. Needs to file an 1120s.

LLC - taxed at shareholder level, dividends nontaxable, may or may not take a salary. Can have a gazillion ways of setting up equity to differentiate between owners. Liability protection. For the most part, earnings subject to self employment taxes. Has 12/31 year end. If single-member LLC, no separate form required, can file as a schedule C on your 1040. If more than one owner, you need to file an 1065, which is the partnership tax form.

Let me know what else you need to know. The type of business you are and your growth plans will help determine which type of entity to be, so post those if you want more in-depth analysis.

...and I wouldn't put too much stock in this. If you're a small business, check what your risks are, and if they are able to be minimized by good business insurance, it's a moot point.

If, however, you are into asbestos installation or tobacco sales, you might want to reconsider.

I incorporated my consulting business in March of this year. I decided to take the advice of other business professionals and seek help instead of Googling and doing it myself. You may be tempted to only spend $100-200 to form a corp on the Internet, but I recommend that you get an accountant, review your financial situation (now and future), then seek a lawyer to form the corp.

Utilizing the help of other professionals isn't cheap, but they have the expertise in their respective fields so you can focus on yours. There are some fields on those incorporation forms that may have an impact on your taxes and revenues - thus some consultation will help. Keep in mind that you'll need to setup payroll and file your State and Federal taxes and respective forms. I believe in spending my time earning money and with my family, thus I pay my CPA to handle that stuff. Others may not mind sitting down and doing it themselves. Ask youself: are you an accountant or a computer professional? :)

My attorney specializes in forming corps for businesses - his fee was $900 and all I had to do was sign some paperwork. I've spent more money on my accountant and at $200/hour he's not cheap. I live in Los Angeles where it seems our CPAs charge much more than other parts of the US.

Good luck in your journey. Oh, I formed a S Corp.