If you are looking to start your own business, one of the things you certainly should be thinking about is what type of business to form. You have heard of LLC and corporations but what does that all really mean? We suffered from this same issue but first of all remember from our previous post, wait as long as possible.
So now you have waited, you’re making money. What type of business do you create? One important factor to consider is liability. I know my first reaction when I heard this was, “I don’t plan on getting sued, why would liability matter?” Liability matters! If you have unlimited liability and your company goes under, investors can take your house and savings. Say goodbye to your child college savings. Sole proprietorship has some advantage such as simplicity and low capital requirements but enormous risks.
To summarize, there are quite a few good take away points.
Both LLC’s and Corporations:
- owned by share holders
- have limited liability
Limited Liability Corporations(LLC) pros:
- simpler, easier to form
- when member is sued, stake in LLC can’t be taken away
- less paperwork
- less tax filings
- no payroll
- can choose to be taxed as a S Corp
- can have non-citizen or non-resident owners
- can have multiple types of stock
- can have other companies as share holders
The benefits of a Corporation are:
- lower taxes(from payroll taxation vs profit taxation)
- sounds more professional Inc.
That is all for now guys. Remember if you have any questions, just post them in the comments section and we will do our best to answer them.