Single student with <$20K/year. LLC or S Corp?

[TylerTycoon]

Thank you all in advance for your help.

I am a student who will be starting a business in the Fall. I will be the sole owner of the business (that's where the "Single student" from title part comes from), but I want to pay other students as "marketing reps" to help sell the product. I'm only selling 1 product and my revenues will probably be $20K or less.

What is the best option to incorporate? LLC? S-Corp? Single-member LLC? I will be doing business in Tennessee which has a high sales tax but not federal income tax--can I incorporate in another state? Is it worth it?

Any help would be tremendously appreciated.

Best Regards,
TylerTycoon

[JLeezer]

Just to correct what you said a little bit: Tennessee has no personal income tax, but does have both sales tax (as you stated) and corporate taxes. Your reference to federal income tax is irrelevant, as all citizens of all states are subject to the same federal taxation regardless of location. The corporate income tax rate in Tennessee is 6.5%. I do not know how this would impact an LLC treated as a pass-through entity for federal purposes. I would highly recommend consulting with a tax advisor local to your area before making a decision on which type of entity to form. Also note, a single member LLC is not really a separate entity; it is just an LLC that only has one person on file with the state as having ownership and control.

[tbeer22]

What is the margin on your product?

You may want to consider an affiliate program, but alternatively you could hire marketing reps as independent contractors most likely. Either way I would probably form an LLC in case you want to take investments on. It's the easiest to make changes to also....

[JLeezer]

Originally Posted by tbeer22

...Either way I would probably form an LLC in case you want to take investments on. It's the easiest to make changes to also....

Could you substantiate either of those statements with something from a reliable source? Why would an LLC be any better than an s-corp or corp? What changes are you referring to and why are they easier to make with an LLC?