Which Business Entity Should I Choose to savor Fin. Aid?

**BizZNasDreamer** · 08-04-2007 08:04 PM

I have 2 questions:
1) Ok so Im am SOOooO confused about Business entities(S/C corps, LLC, etc.) and the tax benefits!! Ahh ..Can anybody clear that up for me?..

2) ALSO I am about to be a Junior in college and i want to start a business, but I don't want to mess up my financial aid for next year('08-'09). I get alot from my school b.c im poor LOL, but if my business profits i dont want them to not give me any money...What would be the best to choose?

3) how have you guys gone around this?

**criniit** · 08-04-2007 08:56 PM

Well I am in no means a tax accountant, but I do know that if you have a sole proprietership everything from profit to losses your buysines has is filed under your name with the IRS. So as far as financial aid goes, if your company makes a lot of money, you might lose some financial aid. (Take my word as a grain of salt though, I'd ask an accountant)

**radreality** · 08-04-2007 09:28 PM

well first off, thats three questions, lol.

1) The best people to talk to are attorneys / accountants / cpa's for this type of stuff. One source I used when I was first getting to know things was NOLO. They have a book called Tax Savvy for Small Business which provides a lot of great information for each of the different entities and why you should choose certain ones.

2) If this is a concern of yours, it sounds like a s-corp is the way to go. It's easier structure financials in a way that looks the way you want it to look (but consultant a cpa and accountant for that).

3) I have hired an attorney, accountant, and cpa. They have to abide by the laws, but there are also grey areas that they can work in to adjust things to be a certain way to fit a certain situation you want.

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**wully00** · 08-05-2007 11:08 AM

I consulted lawyers and tax attorneys, they said LLC's pay less tax overall the S-corp it just limits who can own the company (I believe you have to all be US Citizens for my state). S-Corp's end up saving you once you reach about $100 a year in revenue.

As for financial aid, if you keep the profits in the business (and its not a sole prop.) I believe you should be fine. Just my opinion.

**BizZNasDreamer** · 08-06-2007 10:46 AM

Thanks for THE ADVICE!!!

**jasaunders** · 08-06-2007 01:30 PM

To sum up and maybe provide a more clear explanation:

LLC's - are run very similiar to a sole proprietorship or partnership, the big exception that it provides personal liability protection. Taxes flow through to the individual. If you don't want it to affect your income, you don't pay yourself from the company.
S corp's - are run very similiar to LLC's. There will be a few more documents to fill out, you have liability protection and taxes also flow through to your personal income.
C corp's - are taxed first at the corporate level and then you will be taxed on the personal level off whatever you take out. If you don't want any income, you don't pay any dividends. But when you do want the income, it will be taxed twice.

Laws for each entity varies by state; for instance, some limit or set a minimum number of shareholders that are required. S Corp's in general are easier to add additional shareholders to the company if the need arises compared with LLC's, but they may limit the number of shares and/or shareholders you can have, in which case a C corp would be necessary.

**BizZNasDreamer** · 08-09-2007 04:31 PM

Ok So If I go with a S Corp will I HAVE to sell stock or can I be the only owner.

**radreality** · 08-09-2007 05:39 PM

Originally Posted by BizZNasDreamer

Ok So If I go with a S Corp will I HAVE to sell stock or can I be the only owner.

you can be 100% share holder. If you are the only person, your legal roles within the company are president, treasurer, and secretary.

If this is your first time doing this, I would highly recommend just hiring an attorney, so that way he can answer any and all questions you may have. So you know the advice you are getting is reliable. Even if this isn't your first time doing it, I would still recommend an attorney; its just easier.

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Robert Falk
Business Developer / Investor
Self Help & Success Forum