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LLC vs S Corp: Which is better for potential expansion?
Our business is small right now, but we're hoping to expand at least 200% in the next 2 years. Will an LLC or an S Corp. better support our goals?
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3 Answers
I was an S corporation for 15 years. There are organizational guidelines and corporate structure that must be followed. If you or someone takes the time to follow the guidelines (paperwork, minutes of meetings, officers of corporation listed and more) this could work for you. It did for me. An LLC doesn't involve as much documentation. From my understanding, both have tax advantages. An S corporation pays no taxes. The shareholders pay taxes on dividends, if received, wages that are paid, and profits. A good tax accountant could enlighten you more, as I am not one.
Thank you, Joseph. Your response really helped me out. Do you think the paperwork and guidelines for an S corp is worth the time? Paying no taxes sounds great.
While an LLC is good for a sole proprietor, it will not be ideal for multiple partners. With that said, the LLC Corporate protection is as much viable as an S Corp and the S is truly just a filing form with the IRS mind you. Both have tremendous tax advantages. A C Corp is not. Whil S And LLC Corps are filed under your personal taxes. The question truly becomes which is better from a liability stand point, and ultimately what your true goal will be. If you plan on mass expansion, taking on venture capital or selling shares you should go with an S Corp. If you opt for an S Corp make sure you set all your shares with a 0 par value. If you opt to go with an LLC then you are good as well. Each level of corporation protects its owners a little more than the previous. An LLC requires you to give more personal guarantee than the S Corp, and the C Corp. For a "Tax Benefit" creating an LLC Would be the way to go. If you are formulating a company from the ground up and as I previously mentioned have partners an S Corp is the way to go. The protection is the same, and most courts in the country do not try and pierce the corporate veil unless you have criminal doings of some sourt. the C Corp is the most solid of all corporation types but you are required to fill out a lot more tax paper work, and you truly are double taxed, your business is taxed and you are taxed, while and S and LLC are filed with your own personal return on a long form.
Hope that helps...
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