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MrsYank
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Mrs. Yank
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LLC: Sole proprietorship. vs. Corporation ?
DH just became an LLC.
We didn't realize there were so many options available.
Is there a major difference between a sole proprietorship and a corporation? Any positives or drawbacks for either?
Thanks for help in advance 
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Posted 2/4/10 5:25 PM  |
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Kara
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They call me "Tater Salad"
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Re: LLC: Sole proprietorship. vs. Corporation ?
An LLC is a distinct entity from both a sole proprietorship and a corporation...
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| Posted 2/4/10 5:45 PM |
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MrsYank
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Member since 4/07 3238 total posts
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Mrs. Yank
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Re: LLC: Sole proprietorship. vs. Corporation ?
Posted by Kara
An LLC is a distinct entity from both a sole proprietorship and a corporation...
Then how come we got a form from the NYS Dept of Finance asking "How will the LLC be treated for Tax Purposes" and sole prop. & Corporation are both listed as choices?
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| Posted 2/4/10 6:02 PM |
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Re: LLC: Sole proprietorship. vs. Corporation ?
Posted by MrsYank
Posted by Kara
An LLC is a distinct entity from both a sole proprietorship and a corporation...
Then how come we got a form from the NYS Dept of Finance asking "How will the LLC be treated for Tax Purposes" and sole prop. & Corporation are both listed as choices?
You have to find out which one you can really do. I think the forms are weird and you may not have all those options but they leave it up to you to figure out which ones you can really do for your type of business. My understanding is exactly as Kara posted. I am a P.C. and I had to elect to be treated as an S. Corp. for tax purposes with both the IRS and NY state. I think there was really only one other choice that may have suited a P.C.
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| Posted 2/4/10 6:31 PM |
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telmah
LIF Infant
Member since 1/10 239 total posts
Name:
Prince
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Re: LLC: Sole proprietorship. vs. Corporation ?
You should consult an accountant before you decide on anything, but just briefly...
Is your DH the only member in the LLC? If so, he can either choose to be a treated as a Single-Member LLC or a C-Corp or an S-Corp.
SMLLC is the easiest. No corporate tax returns need to be filed. All he would have to do at year-end is fill out a Schedule C and pay self-employment taxes on the profits of the company.He may also be subject to NYC taxes and pay an annual filing fee to NYS.
As a C-Corp, the company would have to file Federal & State tax returns and pay any payroll taxes if the company has payroll.
S-Corp would be similar to a C-Corp except that the Company would not pay the Corporate taxes. Instead the profits and losses would pass through to the shareholder(s) and they would pay the taxes.
Again, this is just a very brief explanation.
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| Posted 2/4/10 7:32 PM |
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alli3131
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Allison
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Re: LLC: Sole proprietorship. vs. Corporation ?
also you need to keep in mind the personal liability that comes with a sole proprietorship. If at soem point the business has a bad period and its a sole proprietorship and the company owes money...those creditors can come after your DH personally. If it is a corporation the creditors cannot come after his personal assets.
An S Corp does not come with personal liability.
Make sure your DH looks into all of this. I worked as a collection atty and I had so many people think their personal assets were safe but they were a sole proprietorship.
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| Posted 2/4/10 8:13 PM |
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MrsYank
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Member since 4/07 3238 total posts
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Mrs. Yank
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Re: LLC: Sole proprietorship. vs. Corporation ?
Thanks for your responses.
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| Posted 2/4/10 8:35 PM |
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vicky1125
LIF Adolescent
Member since 11/08 767 total posts
Name:
Victoria
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Re: LLC: Sole proprietorship. vs. Corporation ?
Schedule C's also have a greater risk of being audited.
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| Posted 2/4/10 8:44 PM |
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pinkandblue
Our family is complete, maybe
Member since 9/05 32436 total posts
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Stephanie
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Re: LLC: Sole proprietorship. vs. Corporation ?
Posted by vicky1125
Schedule C's also have a greater risk of being audited.
true indeed....my dh has an s-corp
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| Posted 2/4/10 9:11 PM |
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karacg
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Kara®
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Re: LLC: Sole proprietorship. vs. Corporation ?
I am an S-Corp. It seemed to be the safest route -- I personally can't get sued, only the corporation. ALthough I don't forsee ever getting sued in my field.
I consulted with a small business accountant and also the small busi. center at Farmingdale State. My cousin did all the paperwork so I didn't have to pay legal fees.
Good luck.
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| Posted 2/5/10 11:00 AM |
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telmah
LIF Infant
Member since 1/10 239 total posts
Name:
Prince
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Re: LLC: Sole proprietorship. vs. Corporation ?
Posted by vicky1125
Schedule C's also have a greater risk of being audited.
This is true, but one could argue that if you're running your business on the up-and-up and you keep proper records, then an audit is not really anything to worry about. KWIM?
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| Posted 2/5/10 11:03 AM |
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vicky1125
LIF Adolescent
Member since 11/08 767 total posts
Name:
Victoria
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Re: LLC: Sole proprietorship. vs. Corporation ?
Posted by telmah
Posted by vicky1125
Schedule C's also have a greater risk of being audited.
This is true, but one could argue that if you're running your business on the up-and-up and you keep proper records, then an audit is not really anything to worry about. KWIM?
this is true, but dealing with the gov't is always a pita. plus they have a few years to audit you so if g-d forbid you misplace your records and dont have copies, you're screwed. the burden is on you to prove them wrong. better to avoid them.
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| Posted 2/5/10 11:15 AM |
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Kara
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They call me "Tater Salad"
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Re: LLC: Sole proprietorship. vs. Corporation ?
You have FM.
Message edited 2/5/2010 11:26:40 AM.
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| Posted 2/5/10 11:26 AM |
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pinkandblue
Our family is complete, maybe
Member since 9/05 32436 total posts
Name:
Stephanie
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Re: LLC: Sole proprietorship. vs. Corporation ?
Posted by telmah
Posted by vicky1125
Schedule C's also have a greater risk of being audited.
This is true, but one could argue that if you're running your business on the up-and-up and you keep proper records, then an audit is not really anything to worry about. KWIM?
it is a headache, even if you are "by the books"...IMHO, no other setup is "better" than an s-corp
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| Posted 2/5/10 1:44 PM |
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Kara
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Member since 3/07 13217 total posts
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They call me "Tater Salad"
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Re: LLC: Sole proprietorship. vs. Corporation ?
Grr... wrong thread. sorry.
Message edited 2/5/2010 1:46:49 PM.
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| Posted 2/5/10 1:46 PM |
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telmah
LIF Infant
Member since 1/10 239 total posts
Name:
Prince
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Re: LLC: Sole proprietorship. vs. Corporation ?
Posted by pinkandblue
it is a headache, even if you are "by the books"...IMHO, no other setup is "better" than an s-corp
There really is no right or wrong answer since each individual's circumstances will be different
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| Posted 2/5/10 2:10 PM |
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vicky1125
LIF Adolescent
Member since 11/08 767 total posts
Name:
Victoria
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Re: LLC: Sole proprietorship. vs. Corporation ?
Posted by telmah
Posted by pinkandblue
it is a headache, even if you are "by the books"...IMHO, no other setup is "better" than an s-corp
There really is no right or wrong answer since each individual's circumstances will be different
you're right, but technically, schedule c's still have a higher risk of being audited.
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| Posted 2/5/10 2:22 PM |
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pinkandblue
Our family is complete, maybe
Member since 9/05 32436 total posts
Name:
Stephanie
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Re: LLC: Sole proprietorship. vs. Corporation ?
Posted by telmah
Posted by pinkandblue
it is a headache, even if you are "by the books"...IMHO, no other setup is "better" than an s-corp
There really is no right or wrong answer since each individual's circumstances will be different
true, I was givng my perspective
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| Posted 2/5/10 2:38 PM |
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pinkandblue
Our family is complete, maybe
Member since 9/05 32436 total posts
Name:
Stephanie
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Re: LLC: Sole proprietorship. vs. Corporation ?
Posted by vicky1125
Posted by telmah
Posted by pinkandblue
it is a headache, even if you are "by the books"...IMHO, no other setup is "better" than an s-corp
There really is no right or wrong answer since each individual's circumstances will be different
you're right, but technically, schedule c's still have a higher risk of being audited.
as my dad said, "s-corp's have 2 chances of being audited - slim and none and slim just left the building"  
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| Posted 2/5/10 2:39 PM |
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vicky1125
LIF Adolescent
Member since 11/08 767 total posts
Name:
Victoria
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Re: LLC: Sole proprietorship. vs. Corporation ?
Posted by pinkandblue
as my dad said, "s-corp's have 2 chances of being audited - slim and none and slim just left the building"
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| Posted 2/5/10 3:30 PM |
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Beth
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Member since 2/06 24849 total posts
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Beth
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Re: LLC: Sole proprietorship. vs. Corporation ?
I did this last year and my accountant said s-corp...so I took her advice!
Which reminds me...I have to do my taxes!
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| Posted 2/5/10 4:14 PM |
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karacg
Babygirl is 4!
Member since 5/05 17076 total posts
Name:
Kara®
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Re: LLC: Sole proprietorship. vs. Corporation ?
Posted by pinkandblue
as my dad said, "s-corp's have 2 chances of being audited - slim and none and slim just left the building"
I think I love your dad!
And yes, getting audited no matter HOW well you keep records is a HUUUUGE PITA. You lose time, money and possibly clients while having to spend all of your time answering to the auditors.
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| Posted 2/8/10 11:20 PM |
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pinkandblue
Our family is complete, maybe
Member since 9/05 32436 total posts
Name:
Stephanie
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Re: LLC: Sole proprietorship. vs. Corporation ?
Posted by karacg
Posted by pinkandblue
as my dad said, "s-corp's have 2 chances of being audited - slim and none and slim just left the building"
I think I love your dad!
.
My dad IS pretty awesome 
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| Posted 2/9/10 6:33 AM |
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