S Corporatoion VS LLC

[eeloha]

I have read a bunch of comparisons online between the 2 businesses, but still cant find anything in plain and simple english that works for me. I want something easy to operate and save a bunch of money on taxes by writing everything from gas to cell phone bills off. Any opinions?

[jasaunders]

What you're proposing sounds illegal if it isn't for a legitimate business.

If that is all you're using your business entity for, it really won't matter. When you start raising money and talking about capital structure and legal requirements/regulations for an s corp vs. an llc, then there are major differences. It will also depend on your state.

[BusinessAdviser]

An LLC is likely what you're looking for. It is generally simpler and less expensive to start and run, provides limited liability, and offers the same tax advantages as an S Corp. As for writing things off, if it's an ordinary and necessary business expense, it's deductible whether your operating as an LLC, S Corp, or any other business entity.

[jasaunders]

An LLC is likely what you're looking for. It is generally simpler and less expensive to start and run, provides limited liability, and offers the same tax advantages as an S Corp. As for writing things off, if it's an ordinary and necessary business expense, it's deductible whether your operating as an LLC, S Corp, or any other business entity.

I would add that you will want to check your specific state, in some states its cheaper for an S Corp. Here in Illinois it is $150 for an S Corp compared to $500 for an LLC.

[JLeezer]

I would add that you will want to check your specific state, in some states its cheaper for an S Corp. Here in Illinois it is $150 for an S Corp compared to $500 for an LLC.

Same here in TN. It is substantially less expensive to form a corporation as opposed to an LLC.

[BusinessAdviser]

However, guys, there are more costs than just entity creation costs. I would argue an LLC is still less expensive over time.

[jasaunders]

However, guys, there are more costs than just entity creation costs. I would argue an LLC is still less expensive over time.

Could be. Depends on state requirements.

In Illinois there are very few requirements for S Corps. No need to submit annual meeting minutes or really do anything. You have to maintain records, but no submission requirements. In Illinois, I believe it is much more affordable to go with an S Corp. But in many if not most other states, you would be better off with an LLC.

[eeloha]

What you're proposing sounds illegal if it isn't for a legitimate business.

If that is all you're using your business entity for, it really won't matter. When you start raising money and talking about capital structure and legal requirements/regulations for an s corp vs. an llc, then there are major differences. It will also depend on your state.

no no, its nothing illegal. the whole point is so i can save money on taxes. i guess what im trying to do it take the money i make at work and put it into my business as income so i can deduct gas, food, etc. I dont even know if thats smart or possible. eventually i would like to start an online business, but thats in a while. In my state of OH, llc costs the same as S corp to file so thats not an issue. You guys are making me lean more toward an llc though.

[JLeezer]

no no, its nothing illegal. the whole point is so i can save money on taxes. i guess what im trying to do it take the money i make at work and put it into my business as income so i can deduct gas, food, etc. I dont even know if thats smart or possible. eventually i would like to start an online business, but thats in a while. In my state of OH, llc costs the same as S corp to file so thats not an issue. You guys are making me lean more toward an llc though.

I'm presuming that by 'money i make at work' you mean money that is earned from your employer, not a business that you own. If that is the case, you can probably make an investment into your own business with the money you make from work, but your company will have to do actual business that generates revenue and eventually a profit. If it never does this, the IRS will be all over you and will change your classification from a business to a hobby, making you liable for all of the taxes you thought you were saving, plus interest and penalties.

Basically, you can save on taxes while running a business if done properly. You can't save on taxes just by having a business entity registered with your state. A business and an entity are two different things. An entity is just a legal structure that is able to hold the operations of a business.

Hope that helps some.

[Charles of 5DPI]

no no, its nothing illegal. the whole point is so i can save money on taxes. i guess what im trying to do it take the money i make at work and put it into my business as income so i can deduct gas, food, etc. I dont even know if thats smart or possible. eventually i would like to start an online business, but thats in a while. In my state of OH, llc costs the same as S corp to file so thats not an issue. You guys are making me lean more toward an llc though.

Hm, you described something very closely to laundering money.

Not sure about your employer, but they probably charge your taxes already and/or claim it against the government. You are a tax right off for the company, so they will claim you.

That being said, I don't think you'll get ahead by dumping your income into a business entity and then spending it that way. The money is going through two layers. Your employer and then your business, which are both being taxed.

Theoretically, I would say you are making matters worse?

You would need to speak to a CPA to confirm this.

[nocci01]

Don't form a business entity unless you know what the purpose is other than tax advantages. I'm not an attorney or CPA...and this advice was from seminars, books and paying for legal counsel when I started my business entities.

It just depends!

If you're holding real estate, many people prefer the use LLCs or LPs instead of the Corporation or S Corporation. If you hold real property under a corporation, you can still be sued as an individual for shares that you personally own...that may have a negative impact on your real estate owned. It is legal to write off business expenses that you speak of when you become incorporated (includes the formation of an LLC and/or LP); however, you may want to seek advice from a CPA or directly from the IRS.

The C Corporation has certain tax advatages and disadvantages vs. the S Corporation. The C Corp can write off fringe benefits but has double taxation. The S Corp is a pass through entity meaning you won't have the double taxation like the C Corp (pay taxes once or twice). That's why it just all depends on what type of business you are building and exactly what benefits you are seeking more of. Pay the price to learn about the proper entity that suits you and what you're attempting to accomplish.

Just make sure you do it the right way. If you don't have proper documentation and follow the rules and regulations, you can still get in trouble with the IRS and/or others (lawsuits). Corporations require minutes (record book, minute book, black book, etc.) and documentation of the entity's operations including an annual meeting of the shareholders and board of directors. Call up some attorneys or companies that file entities and ask them for advice. It's not hard. Just research thoroughly so you don't cause any problems in the future.

[cwish001]

an LLC would be simple than a S corp because with a s corp you will have to submit annual meetings and other reports to the state. You will also face double taxation with a s corp due to being taxes as a business entity at the corp level and taxed again the the individual rate when you pay yourself dividends. If you pay yourself a salary and you have a low income then you are almost sure to be audited at tax time.

[nocci01]

an LLC would be simple than a S corp because with a s corp you will have to submit annual meetings and other reports to the state. You will also face double taxation with a s corp due to being taxes as a business entity at the corp level and taxed again the the individual rate when you pay yourself dividends. If you pay yourself a salary and you have a low income then you are almost sure to be audited at tax time.

An S Corp does not have double taxation. An S Corp is viewed by the IRS as a small business corporation under Subchapter S. It is a pass through entity and is almost like a partnership if you desire to have a pass through entity (only taxed once on your own 1040 Tax Returns).

An S Corp is not difficult at all compared to the LLC. I have both and my attorneys and CPA help me with all the paperwork that is required by the Secretary of State. How difficult is it to file annual reports and hold at least one meeting a year? Do you want an entity to legally avoid taxes or are you trying to evade from paying taxes? Seek some professional advice and watch out for the opinions and advice here.

[eeloha]

I guess the way you guys explained it makes what im trying to do by saving money on taxes illegal/laundering money. All i wanted to do was be able to write off things that i need for work such as transporation and food. I thought you could only do that when you have a business. i guess the best choice for me in the long run is to have an llc with s cop taxing. I know its possible through paper work from what i've read and researched.

[JLeezer]

I guess the way you guys explained it makes what im trying to do by saving money on taxes illegal/laundering money. All i wanted to do was be able to write off things that i need for work such as transporation and food. I thought you could only do that when you have a business. i guess the best choice for me in the long run is to have an llc with s cop taxing. I know its possible through paper work from what i've read and researched.

Please, please, please go talk to a CPA about all of this BEFORE you file any paperwork with your state. If you don't and you do it wrong, you will most likely waste more time and money than you could possibly save in taxes.