Inc. VS LLC...Need plain English!

**PFCJS** · 05-31-2009 10:09 PM

Hello there...I am starting a painting business on the side as I am a full time firefighter and I know it has probably been asked a thousand times on here but I could not find any answers that defined that I am looking for, at least in terms I could understand! I am wondering what the best way to go is as far as my business becoming an Incorporated or an LLC? I am looking for the best tax advantages. It won't become a huge business just a few odd jobs a month to give me some spending cash on the side...as you'll know the government doesn’t exactly like to pay firefighters that much!

Thanks in advance for any help you guys can throw my way!

**financeblogger123** · 06-01-2009 12:49 AM

Technically you wouldn't even have to incorporate and could just be a sole proprietor...However, with that comes all of the added liability. An LLC should work in your circumstance although my most recent advice that I have recieved is to go with a S-corp. As far as tax's are concerned, I am not so sure that either will have that much of an impact for you. I feel that for what you are doing an LLC would be the easiest, cheapest, and will serve your purpose.

Good luck with the venture.

**JohnGalt** · 06-01-2009 06:32 AM

LLC will most likely be all you need and will be the easiest. You can file the papers in a couple hours and the income from the business will just get recorded on your personal tax return.

Best of luck

**paul2145r** · 06-01-2009 12:00 PM

My rule of thumb for my clients is: If you have to ask, then go with LLC. So far, it's worked out fairly well.

LLC's are great for the situation that you are describing. You are the only owner, you will be doing the work, and wanting the easiest tax structure.

If you incorporate, you have to maintain additional records for the business (takes minutes of meetings, etc). A corporation (unless it is an S-Corp) is taxed independently, meaning that you pay taxes on the business incomes, as well as the income that the business then pays out to you.

An LLC (and S-Corp) is structured to allow the most benefit for smaller businesses that do not have multiple owners/investors. The business taxes are filed in conjunction with your own, meaning that you are only taxed once. If you take a loss on your business, it will also be reflected as a loss in your general tax return. Any profit shows up as income, so make sure that you have a tax attorney or CPA give you some tips on how to properly claim deductions to minimize your tax liability.

If you have any other questions, feel free to send me a PM. I've been down this road before, lol, and know how confusing it can be.

**marcstep411** · 06-01-2009 07:16 PM

I agree an LLC is the simplest for you to deal with and it provides you good personal liability protection. Check to see if you can form a one person LLC in your state, or whether it has to be two persons (e.g., with your spouse or partner). Also, although easy to form, it may still be best to consult an attorney to get an operating agreement (where you set your own rules like one partner, in a two person LLC anyway, getting a guaranteed minimum payment before other partners get paid. This may have tax and social security withholding benefits). If you don't create your own operating agreement, you will accept your state standard by default which may not be best for you.
See The 411 on Startups > LLC or C or S Corp? > Fundraising, Financing, Raise Money, VC, Angels for a number of links on the differences between LLC, c corp and s corp.