What Is The Diffrence Between Llc And Corp.?

[Torr]

I have opened up and llc for my company for staffing agency. Now i don't know if i made the right choiceby opening up a llc in stead of a corp. Cuz i know i will do very good gross sales at the end of the year.i am look to do 500,000 +. now does that matter if i have an llc or corp? Or how would it effect me diffrently in terms llc and corp.? And Which one would be more of a benifit to me at the end of the year.

[Ascott]

If you have a number of employees... ...it would appear that an S corporation would be a better choice than an llc. You end up paying employment tax through out the year as an S corporation, but the total amount is less than it would be if your business were an llc. On the other hand, if you don't have a lot of employees the simplicity of the tax forms for an llc can be a huge advantage. Both are better choices for a small business than a C corporation.DISCUSSION #1S corporations and LLCs are similar in that they are both "pass-through" entities for tax purposes, meaning that the income derived by both S corporations and LLCs is passed through directly to the owners and reported on the owners' personal income tax returns. This is what is known as avoiding double taxation(With a C corporation, the corporation?s net income is subject to corporate income tax, and what remains after the corporate income tax is taxed a second time when it is paid out to the owners). Which Is better ? LLC or S Corporation?Obviously, the answer to that questions depends on your particular situation and should be discussed with a tax professional. So what is the difference between an S corporation and an LLC? And which type of entity is right for you? LLC?s require less formality and paperwork and are more flexible in how owners divide up profits. But, S corporations allow owners to save on employment taxes. Ownership RestrictionsS corporations can only have 100 shareholders. None of the shareholders can be nonresident aliens, nor can they be other corporations or LLCs. S corporations must also follow corporate procedures and have no flexibility in dividing profits among owners(e.g. if John owns 29% of XYZ, Inc., he is only able to make 29% of the profits).There are no restrictions on the ownership of an LLC. Additionally, an LLCs is more simple to operate because it is not subject to the formalities by which S corporations must abide. Division of ProfitsOne big difference between S corporations and LLCs is that owners of an LLC can distribute profits in the manner they see fit. For example, assume Adam and Bart own an LLC to which Adam contributed $80,000 in capital and Bart only contributed $20,000. If Bart performs 80% of work the owners could still decide to split the profits 50/50. If these same partners owned an S Corporation, Adam would be required to take 80% of the profit and Bart only 20%. Employment Tax: Savings by Forming An S CorporationOwners of an LLC are considered to be self-employed and therefore must pay a "self-employment tax" of 15.3%(goes toward social security and Medicare). The entire net income of the LLC?s business is subject to self-employment tax.For S corporations, only the salary paid to the owner-employee is subject to employment tax. The remaining income that is paid as a distribution is not subject to employment tax under IRS rules. Therefore, an owner of an S corporation stands to realize substantial employment tax savings. Examples: S Corporation Scenario Adam owns an ecommerce company that has $60,000 in earnings per year. He pays himself reasonable compensation of $35,000 to run the business. He takes the remaining $25,000 as a distribution. Adam?s total employment tax is $5,355(15.3% of $35,000). In the above scenario, you cannot manipulate your salary to make it artificially low in order to pay less employment tax. If the salary isn?t a reasonable one for your industry and job type, the IRS could reclassify some of the distributions as salary.LLC ScenarioAssume everything in the above example is the same, except that Adam?s entity is an LLC and not an S corporation. As an LLC, Adam would have to pay employment tax on the entire $60,000, equaling $9,180.In the two scenarios above, Adam saves $3,825 in employment tax as an S corporation. The employment tax savings makes the S corporation attractive. But, you still have to deal with paying payroll taxes. The payroll tax is a pay-as-you-go tax that must be paid to the IRS regularly throughout the year--on time, or you will incur interest and penalties. When you incorporate with Click&Inc, you get a free month of payroll processing from ADP and a waiver of all set up fees. The few bucks a day this service will cost you is more than made up by having payroll taxes handled for you.Unlike S corporations that pay as they go, owners of LLCs pay their self-employment tax once a year on April 15 when they would pay their personal income tax. A single-member LLC files the same 1040 tax return and Schedule C as a sole proprietor; partners in an LLC file the same 1065 partnership tax return as do owners of traditional partnerships. The comparison chart below sums up the similarities and differences between the two business structures: ---------------------S Corporation -----------Limited Liability Company Liability Protection -------Yes -------------------------Yes Operational Control Board of Directors/Officers May be member-managed or manager-managed Federal Income Tax -----Pass-through ------------Pass-through Flexibility/Ease of Operation No; subject to some formalities and record keeping rules as traditional C corps Yes Ownership Restrictions Yes No Flexibility in Profit-Sharing No Yes Sources: http://www.clickandinc.com/llc_vs_s_corp.asp AND http://www.powerhomebiz.com/vol136/structure.htm darwin? 75 months ago Please sign in to give a compliment. Please verify your account to give a compliment. Please sign in to send a message. Please verify your account to send a message.

[Rohan]

The LLC combines the tax advantages of a sole proprietorship or partnership with the liability protection of a corporati The LLC combines the tax advantages of a sole proprietorship or partnership with the liability protection of a corporation. The profits of a C corporation are taxed first at corporate tax rates. Then, if the C corporation pays dividends to shareholders, those dividends are taxed a second time at the personal income tax rates of the shareholders. This "double taxation" is avoided by the pass-through nature of LLC taxation. The Internal Revenue Service(IRS) does not consider an LLC itself to be a taxable entity. Instead, the company?s earnings "pass through" to the owners, who report their share of profits or losses on their individual tax returns. Only one personal tax return for each member is required, and the company?s earnings are taxed only once. In a C corporation, dividends to shareholders must be distributed in proportion to the number of shares they own. This is true regardless of the amount of effort an owner put into the business. In contrast, LLC owners can split profits or losses in any way they choose. An LLC owner who owns 50% of the company may actually receive more or less than a 50% share of the profits or losses. This scenario, called a "special allocation," must be accomplished in accordance with IRS regulations. Small business owners should consult their accountant or tax advisor for specific guidance regarding special allocations. Small business owners who want the flexible structure of an LLC but the advantages of corporate taxation can elect for their LLC to be taxed as a corporation. To elect corporate taxation, owners file Form 8832, "Tax Classification Election," with the IRS. This election may allow LLC owners to save on taxes. With corporate taxation, the first $75,000 in income is taxed at corporate tax rates, which are generally lower than the individual tax rates assessed on LLC owners. Electing this status may also make an LLC eligible for certain deductions available only to corporations. For specific guidance, small business owners should consult their accountant or tax advisor regarding this election. Sources: http://www.llc.com/LLC_vs_C_Corporation.html?utm_source=msn&utm_medium=ppc   curiouskitty's Recommendations How to Use Limited Liability Companies & Limited Partnerships Amazon List Price: $19.95 Used from: $19.99 Average Customer Rating: 5.0 out of 5(based on 4 reviews) Nolo's Quick LLC: All You Need to Know About Limited Liability Companies Amazon List Price: $29.99 Used from: $18.80 Average Customer Rating: 4.0 out of 5(based on 13 reviews) Form Your Own Limited Liability Company 4th Edition Amazon List Price: $44.99 Used from: $20.71 Average Customer Rating: 4.0 out of 5(based on 15 reviews) curiouskitty 75 months ago Please sign in to give a compliment. Please verify your account to give a compliment. Please sign in to send a message. Please verify your account to send a message.