Month: April 2016

Corporate Tax Structure

Don’t listen to the internet on corporate tax structures because, quite frankly, every website I see details the different theories behind each business form and doesn’t provide any real guidance.  There are very few reasons (very few) to not go with what I call an S Corp LLC.  Wait?  Is that even possible, you ask.  I’ve never heard of it!  Well, you have now and this is probably the only place on the internet that will offer this advice for free.

A business form is exactly what it sounds like.  Do you want to be a partnership, LLC, corporation (an S Corp is just a corporation, it is NOT a business form), P.C., etc.?  There are only a handful of reasons not to go with an LLC.  A partnership doesn’t provide excellent protection like a corporation and LLC do, but an LLC is governed by contract, not really by statute like a corporation.  In short, minimum technical aspects, maximum flexibility and protection.  That’s an LLC.

Now it’s time to file for how the government is going to ping you.  Subchapter S of the IRS Code allows you to have “pass through” taxation like a partnership (so no double taxation like a corporation).  An “S Corp” is merely a corporation that has elected pass through tax. BUT, here’s the secret, you don’t have to have a corporation for that tax.  You simply fill out your tax election form and check the box that says, in essence, “treat my LLC like a corporation for tax purposes,” then elect Subchapter S treatment.  BOOM! You now have flexibility by having your contracts govern your business instead of statutes.  You now have the protection or minimum liability of an LLC and Corporation.  And you have maximum tax benefits so you can keep more of what you earn!

Advertisements