S Corporation -vs- LLC/LLP

[lordsmurf]

S Corps vs. LLC ... decisions decisions...

Anybody have any feedback from personal experience?
USA residents only (and preferably from Texas).

Thanks.

[Will Hay]

.......USA residents only

Yeah, because this is your site
Gotta love that smurfie
W.

[Hatz]

Don't know the exact rules in Texas but if you are thinking about a company for you and you don't really have any liability then I would go with an S-Corp.

I had to do a huge school project on starting my own company and this is what I chose.....with guidance through my dad that has his own company and also chose an S-Corp.

You may be thinking, but with an LLC, they can't sue me for everything I have. I have talked to 2 of my dads close friends that are lawyers and they said, it is still possible to get most of your belongings. There are ways around the LLC. With and S-Corp you still have limited liability but like said before.......that almost means nothing.

With an S-Corp, if you want to sell the company or what not, then it is easily transferred through the sale of stock (doesn't have to be actual stock) in the company you own. Plus the termination of the business is not directly tied to any one individual should it shut down.

But just remember with an S-Corp that you need to maintain atleast 51 percent of that company.

With the LLC, you aren't neccessarily subject to all the rules as the S-Corp.....but then again you would have to see what your rules are in Texas. With both of them you have no double taxation which is good. One owner can usually not establish an LLC by himself either and many states limit the life of the LLC to 30 years.


I guess it all depends on your states laws and what not. If you are serious about this then I would highly suggest getting ahold of a lawyer just for an opinion. You will need one eventually if you are starting your own business so now is as good of time as ever.

Good luck and hope this helped.

Hatz

[lordsmurf]

.......USA residents only

Yeah, because this is your site
Gotta love that smurfie
W.

Only said it because I live in the USA, so I need information pertinent to my situation. No offense intended. You can bet that if I ever have a question about UK business, it'll say UK residents only.


Thanks HATZ, I'm looking into formalizing a partnership at the moment, and we're going to skip over the expensive lawyer phase. I've got people that can guide me through this that have done it before. I posted here to see if anybody had opinions on one versus the other. We're looking harder at the s-corp because of ideals that we'd eventually like the option to sell out in the future, whether it be to each other or another. I'll have the 51% stake, he'll have the 49% stake. I've looked at Texas law a bit, but getting guidance from those that know it and do it.

[Hatz]

Well a partnership might be another good way to go about it. They are pretty easy to establish and financing is usually pretty easy to secure. The parternership doesn't pay any taxes either.....which is very good.

But be careful when establishing a partnership as your form of ownership because the partners are bound by the actions of the other. Alot of partnerships break up as well. Also partnerships share unlimited liability for debt and litigation. And the partnership is sometimes also hard to end.....atleast on a good note.

Another thing they say is to try not to go into a partnership with a close friend or family member because it can cause trouble with the relationship. Since decision making is shared, you might not always agree on certain things and overtime things can build up and boil over. However, if one person is just a silent partner and just looking for profit sharing then this isn't so bad.

Out of the three forms of ownership I would either pick the S-Corp (you being the pres. and him being the vp.....stock holder wise) and the Partnership.

The thing that is so appealing to about the S-Corp if you own the building is paying yourself through the rent money. And rent is considered as a direct write off expense so your paycheck won't be taxed.

Have you thought about making a business plan? We had to for our business and they really help out alot. When trying to finance through a bank they will most every time need to see your business plan in detail before they will even consider you.

Hope this helps out. If you get really serious about this and need financing and want to know how to write a business plan, I have an old book from that business class. It gives step by step on how to write one for a bank and what should be covered in one.

Good luck.

Hatz

[lordsmurf]

Yes, this is 100% serious and will be implemented soon here. Hopefully in February we'd like this to be completely cleared up. We've been going over it since about September, making sure we cover all the bases. I'll PM you about the book.

In addition to the partnership, we may have a silent 3rd member of lesser holding value. So the corporate method with drawn-up stock certificates was the initial idea.

LLC was thrown in our face by a few that started their own business, but we weren't so sure that'd be the best avenue. At any rate, we need to get the business out of our pockets, and into a company. We did not want a DBA or anything of similar design. Limited liability is a concern, as you never know what could happen. We do plan to do this by the books.

Thanks again.